Taylor Farms Cal., Inc. v. Coopers Cold Food, Inc., 19-cv-8924 DDP (GJSx)

TAYLOR FARMS CALIFORNIA, INC., a California corporation, Plaintiff, v. COOPER'S COLD FOODS, INC., a California corporation; and, ADAM COOPER, an individual, Defendants.

MONTEREY MUSHROOMS, INC., a California corporation; and, FARMERS LINK, INC., a California corporation, Intervening Plaintiffs, v. COOPER COLD FOODS, INC., a California corporation; and, ADAM COOPER, an individual, Defendants.

No. 19-cv-8924 DDP (GJSx)

United States District Court, C.D. California

August 9, 2021

ORDER GRANTING INTERVENING PLAINTIFF MONTEREY MUSHROOMS' MOTION FOR SUMMARY JUDGMENT AND GRANTING IN PART, DENYING IN PART DEFENDANT ADAM COOPER'S MOTION FOR SUMMARY JUDGMENT

[DKTS. 58, 64]

DEAN D. PREGERSON UNITED STATES DISTRICT JUDGE

Presently before the court are Intervening Plaintiff Monterey Mushrooms' and Defendant Adam Cooper's cross motions for summary judgment. (Dkts. 58, 64.) Having considered the submissions of the parties and heard oral argument, the court grants Intervening Plaintiff's motion, and grants in part, denies in part Defendant's motion, and adopts the following order.

I. BACKGROUND

On November 7, 2019, Intervening Plaintiff Monterey Mushrooms Inc. (“Monterey Mushrooms”) filed a Complaint-in-Intervention asserting a breach of contract claim and seeking enforcement of payment under the Perishable Agricultural Commodities Act (“PACA”) against Defendant Cooper Cold Foods, Inc. (“Cooper Cold Foods”) and Defendant Adam Cooper (“Cooper”). (See dkt. 10.) Monterey Mushrooms is a California corporation engaged in buying and selling wholesale quantities of perishable agricultural commodities, or “produce, ” and operates under the PACA. (Dkt. 67, Jenkins Decl. ¶ 7.) Cooper Cold Foods was a produce distributor founded in 1966 also operating under the PACA. (Dkt. 61, Cooper Decl. ¶¶ 3-4.) Cooper was the President, CEO, sole director, officer, and shareholder of Cooper Cold Foods from approximately 2010 until it ceased operations in 2019. (Id. ¶ 5.)

Between April 24, 2019 and August 18, 2019, Monterey Mushrooms and Cooper Cold Foods entered into various transactions in which Monterey Mushrooms sold, and Cooper Cold Foods purchased, eighty shipments of produce in the principal amount of $241, 744.26. (Jenkins Decl. ¶¶ 9-10; Dkt. 66, Ex. 1, Cooper Cold Foods Admissions ## 3, 7.) Cooper Cold Foods received and accepted the produce without objection. (Jenkins Decl. ¶¶ 9-10; Cooper Cold Foods Admissions # 4.) Monterey Mushrooms sent invoices to Cooper Cold Foods stating the agreed prices for the produce purchased. (Jenkins Decl. ¶ 11; Cooper Cold Foods Admissions # 6.) Each invoice included the required statutory statement to preserve Monterey Mushrooms' rights as a PACA trust beneficiary. (Jenkins Decl. ¶ 14; Cooper Cold Foods Admissions # 8.) The parties do not dispute that Cooper Cold Foods failed to pay for the produce it purchased and received from Monterey Mushrooms. (Jenkins Decl. ¶ 17; Cooper Cold Foods Admissions # 12.)

Monterey Mushrooms presently moves for summary judgment on all claims against Cooper Cold Foods and summary judgment against Cooper individually for breach of fiduciary duty for failure to maintain PACA trust assets. (Dkt. 65, Monterey Mushrooms' MSJ.) Monterey Mushrooms maintains that Cooper is secondarily liable for Cooper Cold Foods' debt because the undisputed facts demonstrate that Cooper was in a position to control Cooper Cold Foods. Cooper does not dispute that during the relevant time at issue, he had control and authority of Cooper Cold Foods. Instead, Cooper opposes Monterey Mushrooms' motion for summary judgment, and moves for summary judgment in his favor, asserting that the facts demonstrate that neither he nor Cooper Cold Foods breached their fiduciary duty under PACA because they did not “misuse” any PACA assets. (See dkt. 59, Cooper MSJ; Dkt. 76, Cooper Opp.) Cooper argues that on June 26, 2019, prior to dissolving, Cooper Cold Foods was burglarized and that a safe that was in Cooper Cold Foods' office was stolen. (Cooper Decl. ¶ 14; Dkt. 62, Pivtorak Decl., Ex. 2, Gaytan Depo. at 23-24.) Cooper testified that at the time the safe was stolen, the safe contained approximately $500, 000 in cash which was PACA trust property and other valuable heirlooms and collectibles. (Cooper Decl. ¶ 15, Exs. 2-4.) According to Cooper, the PACA trust property in the safe would have been sufficient to pay PACA beneficiaries. (Id. ¶ 20.)

Cooper also presents evidence that between April 15, 2019 and Cooper Cold Foods' closing, Cooper Cold Foods used its assets only to pay employee salaries and ordinary business expenses. (Id. ¶ 17, Exs. 5, 6.) At the time of closing, Cooper Cold Foods' remaining assets were $130, 000. (Id. ¶ 18.) Cooper also presents evidence that Cooper Cold Foods was owed $60, 000 in unpaid PACA accounts receivable from restaurants which it was unable to recover. (Id. ¶ 22, Ex. 9.) Cooper Cold Foods' outstanding PACA debt, to approximately twenty PACA creditors, totaled $522, 684.81. (Id. ¶ 25, Ex. 8.) Cooper contends that Cooper Cold Foods attempted to distribute its remaining assets pro rata to unpaid PACA sellers. (Id. ¶ 24.)

While Monterey Mushrooms does not dispute that Cooper Cold Foods was burglarized, Monterey Mushrooms disputes Cooper's evidence as insufficient to establish that the safe contained $500, 000 in PACA trust property. Monterey Mushrooms also disputes Cooper's assertion that the money contained in the safe would have been used to pay Monterey Mushrooms based on Cooper's testimony that the funds were saved for a “rainy day” and, prior to being stolen in June, had not been used to pay Monterey Mushrooms' invoices which at the time were already past due. (See Cooper Depo. at 75:15-30; 76:1-8.) Monterey Mushrooms does not dispute that Cooper Cold Foods paid employee salaries and ordinary business expenses.

II. LEGAL STANDARD

Summary judgment is appropriate where the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show “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). A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). All reasonable inferences from the evidence must be drawn in favor of the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 242 (1986). If the moving party does not bear the burden of proof at trial, it is entitled to summary judgment if it can demonstrate that “there is an absence of evidence to support the nonmoving party's case.” Celotex, 477 U.S. at 323.

Once the moving party meets its burden, the burden shifts to the nonmoving party opposing the motion, who must “set forth specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 256. Summary judgment is warranted if a party “fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322. A genuine issue exists if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party, ” and material facts are those “that might affect the outcome of the suit under the governing law.” Anderson, 477 U.S. at 248. There is no genuine issue of fact “[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

It is not the court's task “to scour the record in search of a genuine issue of triable fact.” Keenan v. Allan, 91 F.3d 1275, 1278 (9th Cir. 1996). Counsel have an obligation to lay out their support clearly. Carmen v. San Francisco Sch. Dist., 237 F.3d 1026, 1031 (9th Cir. 2001). The court “need not examine the entire file for evidence establishing a genuine issue of fact, where the evidence is not set forth in the opposition papers with adequate references so that it could conveniently be found.” Id.

III. DISCUSSION

A. Perishable Agricultural Commodities Act (“PACA”), 7 U.S.C. § 499a et seq.

a. Failure to Pay Promptly and Failure to Maintain PACA Trust Assets

“Enacted in 1930, PACA had the intent of ‘preventing unfair business practices and promoting financial responsibility in the fresh fruit and produce industry.'” Sunkist Growers, Inc. v. Fisher, 104 F.3d 280, 282 (9th Cir. 1997) (quoting Farley and Calfee, Inc. v. United States Dep't of Agric., 941 F.2d 964, 966 (9th Cir. 1991)). In 1984, Congress amended PACA to “to add an additional remedy: the perishable commodities or proceeds from the sale of those commodities are held in trust by the dealer for the benefit of the unpaid seller until full payment is made.” Id. (citing 7 U.S.C. § 499e(c)(2)); see also, S & H Packing & Sales Co. v. Tanimura Distrib., Inc., 883 F.3d 797, 802 (9th Cir. 2018) (discussing PACA's legislative history). Section 499e(c)(2) of PACA provides, in part, as follows:

[p]erishable agricultural commodities received by a commission merchant, dealer, or broker in all transactions, and all inventories of food or other products derived from perishable agricultural commodities, and any receivables or proceeds from the sale of such commodities or products, shall be held by such commission merchant, dealer, or broker in trust for the benefit of all unpaid suppliers or sellers of such commodities or agents involved in the transaction, until full payment of the sums owing in connection with such transactions has been

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