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Harris N.A v. Bacchus Fresh International

March 25, 2013

HARRIS N.A., PLAINTIFF,
v.
BACCHUS FRESH INTERNATIONAL, INC., ET AL., DEFENDANTS.
VALPER, S.A. DE C.V., CROSS-CLAIMANT AND THIRD-PARTY PLAINTIFF,
v.
BACCHUS FRESH INTERNATIONAL, INC., CROSS-DEFENDANT, DAVID F. ESTERLINE, AN INDIVIDUAL, THIRD-PARTY DEFENDANT.
AGRICOLA Y COMERCIAL CABILFRUT S.A., A CHILEAN COMPANY; SOCIEDAD AGRICOLA SATURNO S.A., A PERUVIAN COMPANY; C.I. WOLF & WOLF LATIN AMERICA S.A., A COLOMBIAN COMPANY; FRUTAS PIURANAS SAC, A PERUVIAN COMPANY; INTERVENING PLAINTIFFS,
v.
BACCHUS FRESH INTERNATIONAL, INC., AND DAVID F. ESTERLINE, DEFENDANTS.



The opinion of the court was delivered by: Judge Rebecca R. Pallmeyer

MEMORANDUM OPINION AND ORDER

The Perishable Agricultural Commodities Act of 1930 ("PACA"), 7 U.S.C. §§ 499a-499t (2009 & Supp. 2010) protects 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 of produce, 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). The claimants in this case sold perishable agricultural commodities to Defendant Bacchus Fresh International, Inc. ("Bacchus"), and Bacchus failed to pay for that produce. The court established a claims procedure and entered a judgment against Bacchus. Plaintiffs AgroExport LLC, Sanchez Hass Avocado Corp., Rio Queen Citrus, Inc., Cohn Produce Company, Inc., and New Mundoexport Fruit, Inc. (collectively "AgroExport Group" or "Agro Plaintiffs") now seek entry of a judgment in the same amount against individual Defendant David F. Esterline ("Esterline" or "Defendant") on the theory that Esterline was an officer of Bacchus and had the power to manage Plaintiffs' trust assets. For the reasons set forth below, the court denies the Agro Plaintiffs' motion for summary judgment [149] and grants Defendant Esterline's motion for summary judgment [146].

INTRODUCTION

The AgroExport Group are unpaid sellers of wholesale quantities of perishable agricultural commodities ("produce") who sold produce to the Bacchus and never received payment. On June 17, 2011, this court entered a Consent Injunction and Claims Procedure Order. (See June 17, 2011 Consent Inj. and Order [37].) The Plaintiffs' PACA trust claims total in the principal sum of $848,102.74, plus interest and fees, resulting in total claims of $944,551.54, and the AgroExport Group's claims total $318,712.07, including principal, interest and attorneys' fees. (See Jan. 18, 2012 Minute Order [104]; July 19, 2012 Minute Order [141].)*fn1 Plaintiffs contend that Esterline, as a principal of the Company, is personally liable for the PACA debts of the Company. On cross-motions for summary judgment, the court concludes, as explained below, that Esterline is not personally liable.

FACTUAL BACKGROUND

Defendant Esterline began working for Bacchus Fresh International in 1999. At that time, Bacchus was a division of Fresh America. (Esterline Aff. ¶ 3, Attach. 1 to Def.'s Rule 56.1(a) Statement of Facts [148] (hereinafter "Def.'s 56.1(a)".) In 2001, the divisional president of Bacchus Fresh International, Robert M. Jajkowski ("Jajkowski"), purchased the Bacchus division. (Id.) After Jajkowski's purchase, the Bacchus staff consisted of three other individuals: Mary McGuiness, import coordinator; Ana Meza, bookkeeper; and Esterline, produce salesman. (Esterline Aff. ¶ 3; Meza Aff. ¶ 3, Attach. 2 to Def.'s 56.1(a).) The Company was incorporated, and Jajkowski offered Esterline a minority ownership interest. (Esterline Aff. ¶¶ 4-5.) Esterline accepted, agreeing to pay approximately $90,000 for twenty percent of the Company stock. (Id. ¶ 5.) Esterline paid this sum through a payroll deduction of $1,000 from every paycheck for about three years. (Id.) At all relevant times, Jajkowski retained ownership of the remaining eighty percent of the Company stock. (Id.)

Corporate documents name Esterline as the Company's vice president, and the Illinois Secretary of State's website identifies him as the Company's secretary. (Esterline Aff. ¶ 6; Meza Aff. ¶ 9.) The 2009 and 2010 Illinois Domestic/Foreign Annual Reports also identify Esterline as one of the Company's officers or directors, and its secretary. (Pls.' Rule 56.1(a) Statement of Facts [149-2] (hereinafter "Pls.' 56.1(a)"), ¶ 15.) The same information is also reflected by Blue Book Services, Inc. (a produce industry credit reporting agency). (Id. ¶ 16.) Esterline is also listed on three credit applications. (Id.) Esterline asserts that these applications were filled out and signed by Jajkowski alone, and that he was not aware of their existence prior to this litigation. (Esterline Suppl. Aff. ¶¶ 18-19, Attach. 1 to Def.'s Resp. to Pls.' 56.1(a) [156] (hereinafter "Def.'s 56.1 Resp.").) Esterline's name also appears on Bacchus's PACA license. (See PACA Documents, Ex. B to Pls.' Resp. to Def.'s 56.1(a) [159] (hereinafter "Pls.' 56.1 Resp.").)

It is undisputed that Esterline played some role as an officer of the corporation. Esterline occasionally signed documents as an officer of Bacchus. (Esterline Aff. ¶ 21.) For example, once a year, the Company's attorney sent Esterline a statement to sign, as the Company's secretary, confirming that there had been no change in the corporation's status. (Id.) Esterline also signed a Harris Bank new account application, a $1,750,000.00 Promissory Note, and a General Security Agreement on behalf of Bacchus in favor of Harris Bank. (Harris Documents at 2, Ex. A to Pls.' 56.1 Resp.) Esterline maintains, however, that he only signed documents at Jajkowski's direction, and that he never carefully reviewed any of these documents, or retained any copies for his own records. (Esterline Aff. ¶ 21.) Esterline also did not have custody or control of Bacchus's corporate minute books, and does not even know whether such records exist. (Esterline Aff. ¶ 23; Meza Aff. ¶ 24.)

Esterline also asserts that he never attended stockholders' meetings, board of directors' meetings, or any other corporate meetings. (Esterline Aff. ¶¶ 11-13.) Documents that Esterline and Jajkowski signed to open a Harris Bank account for Bacchus on April 28, 2010 state that a board of directors meeting was held that day at which a quorum was present (Harris Documents at 2), but Esterline denies that he attended any such meeting. (Def.'s Resp. to Pls.' 56.1 Statement of Additional Facts, [162] ¶ 2.) Aside from the Harris Bank documents, there is no evidence of formal corporate meetings. Esterline acknowledges that he attended meetings with the Company's attorney(s), but asserts that he did so only when Jajkowski wanted him to sign a document.

(Esterline Aff. ¶ 15.) Esterline also attended one meeting with the Company's accountant in 2006 or 2007. (Id.)

Esterline received a bi-monthly paycheck from Bacchus, and, on one occasion at the end of 2006, was paid a bonus--at the direction of, and in an amount determined by, Jajkowksi. (Esterline Aff. ¶ 24; Meza Aff. ¶ 25.) Esterline maintains that as a produce salesman, he had no decision-making power for any purpose except for selling produce. (Esterline Aff. ¶ 8; Meza Aff. ¶¶ 5, 6, 10, 11.) At some point, the Company added employees, but Esterline did not supervise or manage any of them. He had no authority to hire or fire other workers, and had no input into how much they were paid. (Esterline Aff. ¶ 25; Meza Aff. ¶ 18.) On one occasion, when two other employees wanted to become partners in the business, Esterline supported the idea, but Jajkowski rejected it and instead fired the two employees. (Esterline Aff. ¶ 14; Meza Aff. ¶ 17.)

Even after becoming a shareholder, Esterline asserts, he continued on in his previous role as a produce salesman, while Jajkowski maintained all responsibility and control over the management and day-to-day operations of the Company. (Esterline Aff. ¶¶ 8-9; Meza Aff. ¶¶ 5, 6, 10, 11.) Esterline was only responsible for his own sales, and did not approve suppliers used by other Company employees or those from whom other Company employees made purchases. (Meza Aff. ¶ 13.) Esterline acknowledges that he represented the company in actions before the United States Department of Agriculture, collecting sums owed to Bacchus and defending claims against the trust. (Pls.' 56.1(a) ¶ 14; Esterline Suppl. Aff. ¶¶ 13-17.) He explains, however, that he represented Bacchus on those particular matters because they involved his customers and accounts. (Esterline Suppl. Aff. ¶¶ 13-17.)

Esterline reports that he had only a limited role in managing the Corporation's financial affairs. On some occasions, Esterline extended lines of credit of up to $50,000 to customers (Pls.' 56.1(a) ¶ 13), but he did so only with Jajkowski's approval, and did not have authority to make decisions concerning the credit limits of other Company salespersons' accounts. (Esterline Suppl. Aff. ¶¶ 11-12; Meza Aff. ¶ 14.) As a salesman, Esterline was accountable for collecting money from Bacchus's customers, and therefore had access to accounts receivable information, and was able to access customer invoices in the Company computer. (Esterline Aff. ¶¶ 27, 31, 37; Meza Aff. ¶ 27.) He could access only such basic information as the customer's name, the quantity, and the sale price, however, and had no power to alter the invoices. Only Meza and Jajkowski were authorized to do so. (Id.)

Significantly, Esterline had no access to accounts payable information. (Esterline Aff. ¶ 32; Meza Aff. ¶ 31.) During most of his tenure with Bacchus, all accounts payable were handled by Meza and Jajkowski. (Esterline Aff. ¶ 28; Meza Aff. ¶ 28.) Near the end of Esterline's employment, Hernan Brave ("Brave") was also involved with accounts payable. (Id.) Brave acted as director of procurement for Bacchus, purchasing produce from the Company's office in New Jersey and handling grower relations. (Id.) Esterline made no decisions about which bills or vendors were paid. (Esterline Aff. ¶ 29; Meza Aff. ¶¶ 13, 29.) And, though he was a signatory on the Company's bank account, Esterline claims he never reviewed the account, never received or reviewed bank statements, and simply signed documents at Jajkowksi's direction. (Esterline Aff. ¶¶ 18, 22; Meza Aff. ¶ 20.) Esterline had no online access to Bacchus's funds or banking records; had no way of reviewing any of the financial information; had no access to Bacchus's books and records; never had possession or control of the Bacchus checkbook (if there was one--Esterline does not know); never knew the balance in Bacchus's bank account; and was not authorized to make wire transfers. (Esterline Aff. ¶¶ 17, 20; Meza Aff. ¶¶ 21-23.) In her affidavit, Meza explained that she prepared checks and printed them on a computer and does not recall Esterline ever signing any checks. (Meza Aff. ¶ 8.) Meza confirmed Esterline's account that he had no access to ...


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