In Re: Quality Sales LLC
A seller of perishable commodities will not be entitled to priority over other creditors under the Perishable Agricultural Commodities Act, 7 United States Code §499, unless it perfects its claims within 30 days of the date that payment is owed. Cupola Hollow Farm and Clark Farms signed contracts to sell tomatoes and squash. The buyer picked the tomatoes and squash between Aug. 2 and Sept. 30, 2011 and provided partial payments between Sept. 16 and Dec. 2, 2011. The buyer sought Chapter 7 bankruptcy protection on Jan. 4, 2012. Cupola and Clark sent a Jan. 20, 2012, letter to the U.S. Department of Agriculture, to indicate that they intended to protect PACA rights. Cupola and Clark filed a PACA trust proof of claim in the amount of $41,760 and requested attorneys' fees of $2,101. The Chapter 7 trustee objected that they did not comply with notice requirements. Cupola and Clark requested that the Bankruptcy Court find "substantial compliance" with PACA notice requirements. PACA provides qualified produce suppliers a priority "superior to all other creditors, including secured creditors," pursuant to D.M. Rothman & Co. v. Korea Commercial Bank of New York, a 2005 decision of the U.S. Court of Appeals for the 2nd Circuit. A seller is not entitled to PACA protection unless it perfects its claims within 30 days after the payment is owed and sends notice of intent to preserve PACA trust benefits to the U.S. Department of Agriculture and the buyer. The Bankruptcy Court sustained the Chapter 7 trustee's objection. Cupola and Clark's alleged notice to the debtor was not timely, within 30 days of the payment due date of Oct. 30, 2011. PACA notice should have been sent to the debtor on or before November 29. Cupola and Clark's Jan. 20, 2012, letter to the USDA was not timely. "[T]he Sellers," wrote the court, "have not met even the less rigorous `substantial compliance' standard." The Perishable Agricultural Commodities Act did not cover Cupola and Clark's claim, which the Bankruptcy Court preserved as an unsecured claim for $41,760 that is not entitled to priority over all other creditors.