Finance
PACA Liens Could Impact Financing Terms
The Perishable Agricultural Commodities Act (PACA) is a federal law enacted in 1930 with the goal of protecting suppliers and sellers of agricultural goods from the effects of nonpayment by certain third parties. PACA requires the establishment of a statutory trust for the benefit of unpaid suppliers or sellers of perishable agricultural commodities, such as fruits and vegetables or products. The statutory trust provides its beneficiaries with superior rights over other creditors, including secured creditors. As such, in lending transactions to purchasers of perishable goods, such as restaurants, secured creditors will try to mitigate the risk of unpaid PACA claims owed by their borrowers. In loan facilities to restaurant companies, secured lenders may require specific covenants in their loan documents requiring restaurant borrowers to provide timely notice of any PACA claims they receive from their suppliers. They also may require the establishment of reserves to cover the costs of any such claims.
The amount of the claim may include the cost of the goods themselves in addition to transaction costs such as shipping fees and taxes. Lenders providing loan facilities secured by real property will routinely require a mortgagee policy of title insurance. Frequently, the title insurer will exclude from coverage liens arising pursuant to PACA. If the lender will not accept an exclusion from coverage, the restaurant borrower may need to obtain a lien waiver from the supplier or a separate indemnity for the benefit of the insurer. Additionally, the lender may require an accounting of the borrower's supply contracts that could potentially result in PACA lien claims, and also require that the borrower establish that any such claims be paid current prior to closing. Such payments may be difficult to ascertain depending on the supplier payment schedule. Lenders and borrowers potentially subject to PACA lien claims should carefully consider the implications for financing structures and consult experienced legal counsel with knowledge of the PACA framework and related case law.
– John A. Decker
Labor and Employment
Court Finds Employees Legally Protected When Disparaging Employer Products
A recent decision by the U.S. Court of Appeals for the Eighth Circuit in Miklin Enterprises, Inc. v. National Labor Relations Board affirmed the 2014 National Labor Relations Board (NLRB) decision requiring a Jimmy John's franchise owner to, among other things, rehire workers who had posted flyers all around their neighborhood suggesting that Jimmy John's sandwiches were made by sick workers. The flyer said that Jimmy John's workers "don't get paid sick days" and "can't even call in sick," and also stated: "We hope your immune system is ready because you're about the take the sandwich test ... Help Jimmy John's workers win sick days."
The court affirmed the NLRB's decision finding that the workers who posted these flyers were protected under Section 7 of the National Labor Relations Act, which guarantees all employees – whether unionized or not – the right to engage in "concerted activities for ... mutual aid or protection," including campaigning for better working conditions. This decision held that such protection could even extend to the kind of derogatory public statements made by the Jimmy John's workers at issue because the court found that the statements had some element of truth, were not intentionally malicious and were connected to a labor dispute.
This decision continues the trend of judicial enforcement of the NLRB's expansion of Section 7 protection for insubordinate or disparaging employee behavior directed at employers – whether made in person or over social media. In light of this development, employers should carefully consider the federal labor law implications of their employment policies and disciplinary decisions.
– Katherine H. Marques
Class Actions
Litigating Food and Beverage Labels
An increasing number of consumers demand healthier foods. They are behind an avalanche of lawsuits claiming that labels are...
