v.
Thomas Smith
File Name: 13a0339n.06
No. 12-5659
FILED
Apr 08, 2013
UNITED STATES COURT OF APPEALS
DEBORAH S. HUNT, Clerk
FOR THE SIXTH CIRCUIT
SIX L’S PACKING CO., INC., )
)
Plaintiff-Appellee, )
)
v. )
)
JAMES ERIC BEALE; JAMES R. BEALE, )
dba Sunfresh Farms, ) ON APPEAL FROM THE UNITED
) STATES DISTRICT COURT FOR THE
Defendant-Appellants, ) MIDDLE DISTRICT OF TENNESSEE
)
and )
)
J.E. BEALE PRODUCE, INC.; KATTIA )
MARIA BISCHOFF-BEALE; SUNFRESH )
FARMS, INC.; SUNFRESH, INC., )
)
Defendants. )
Before: CLAY, COOK, and ROTH, Circuit Judges.*
COOK, Circuit Judge. Six L’s Packing Co. (“Six L’s”) sued James R. Beale d/b/a Sunfresh Farms (“JR Beale” or “Sunfresh”) and salesman James Eric Beale (“JE Beale” or “salesman Beale”) under the Perishable Agricultural Commodities Act (“PACA” or “Act”), 7 U.S.C. §§ 499a-499t. Sunfresh appeals the district court’s grant of summary judgment to Six L’s, as well as its denial of
* The Honorable Jane R. Roth, Senior Circuit Judge for the United States Court of Appeals for the Third Circuit, sitting by designation.
No. 12-5659 Six L’s v. JR Beale, et al.
Sunfresh’s PACA-based counterclaim. JE Beale appeals the district court’s judgment against him individually under the Act. We AFFIRM the district court’s grant of summary judgment to Six L’s and its denial of Sunfresh’s counterclaim, but REVERSE its individual liability judgment. I.
A. The Parties
As licensed PACA merchants, Six L’s and Sunfresh buy and sell fresh produce. [7] U.S.C. §§ 499a-499d. JR Beale runs Tennessee-based Sunfresh with his son, JE Beale, as his salesman. Within certain pre-set limits, salesman Beale could buy and sell produce without obtaining his father’s approval. Salesman Beale does not, however, own an interest in Sunfresh or issue invoices on its behalf; he also lacks signatory authority for the company’s accounts. When ordering tomatoes from Six L’s, salesman Beale would usually email Six L’s sales representative, Carlo Laporta, the quantity of tomatoes for purchase, a pick-up date from Six L’s warehouse in Immokalee, Florida, and a numbered Purchase Order (“PO”). Six L’s would then place the reserved quantity of gas-green tomatoes1 into a ripening room for up to eight days before pick-up. The market value of the produce on the pick-up date set the contract price.
No. 12-5659 Six L’s v. JR Beale, et al.
Six L’s preprinted invoices included the statement: “All sales FOB no grade contracts. PACA good delivery standards apply.” PACA “good delivery standards” require that, upon reaching their destination, no greater than 15% of tomatoes exhibit defects (such as bruising or discoloration).
B. Six L’s Unpaid Invoices
1. Invoice #242127
In November 2009, JE Beale ordered 1,178 cases of tomatoes from Six L’s with an invoice totaling $26,629.10 (invoice # 242127). A truck picked up the shipment at Six L’s loading dock in Immokalee on December 1 and delivered the produce to Sunfresh’s customer, General Produce, Inc. (“GPI”), in Atlanta. GPI received and accepted the produce on December 2, but reported some problems with 640 cases of Florida Silk tomatoes. That same day, GPI requested a USDA inspection of the tomatoes, which occurred within the hour. Per Sunfresh and GPI’s instructions, USDA inspectors examined only the 640 boxes of Florida Silks, as GPI had already sold the rest of the order. The USDA inspection certificate, which listed the shipment status as “unloaded,” reported a 23% “checksum.”2 Asserting breach of contract, Sunfresh proposed to pay $17,701.10 rather than the invoiced $26,629.10. Six L’s rejected this offer.
No. 12-5659 Six L’s v. JR Beale, et al.
2. Invoices #242380 and #242381
On December 1, 2009, before the GPI load problems devolved into an invoice dispute, JE Beale emailed Laporta, placing two orders on Sunfresh’s behalf: one for 800 cases of “Silk” tomatoes (PO #17523), and a second for 400 cases of “Velvet” tomatoes (PO #17524). The salesmen’s email exchange did not include a pick-up date. Seven days later, JE Beale sent another email to Laporta, directing him to “keep [Sunfresh’s] orders cool” because his “original customer backed out today.” Two days later, Sunfresh picked up 240 of the 800 Silk cases and 160 of the 400 Velvet cases, paying Six L’s the December 8 price per case: $23.95 (Silk) and $21.95 (Velvet). Four days after the partial pick-up, Six L’s warned Sunfresh that it would hold the remaining 800 cases of tomatoes for two more days. When Sunfresh failed to pick up the produce, Six L’s resold the tomatoes at a case rate 12 dollars below the contract price (Silks at $11.95 and Velvets at $9.95 per case), billing Sunfresh for the difference. Invoices #242380 and #242381, charging Sunfresh $6,720 and $2,880 for the Silks and Velvets, reflect those charges.
3. Invoice #243406 and Settlement Attempts
Six L’s final invoice (#243406) concerns a December 21, 2009 order for 360 cases of green bell peppers. Sunfresh admits that it owes Six L’s the full invoice amount for this purchase, and further reports that it attempted to settle its account when it offered partial payment for the other three disputed transactions. Specifically, on November 4, 2010, Sunfresh’s attorney sent a letter to Six L’s counsel, along with a check for $13,915.10. Sunfresh agreed to pay the $1,614 owed for the No. 12-5659 Six L’s v. JR Beale, et al.
bell peppers, $17,701.10 for the $26,629.10 invoice, and nothing for the abandoned tomatoes. It deducted $5,400 that Six L’s allegedly owed on Sunfresh’s invoice #17204, resulting in its settlement offer of $13,915.10. Six L’s returned the check, refusing partial repayment.
C. Sunfresh’s Invoice
Sunfresh’s counterclaim stems from a sale of 54 cantaloupe bins to Six L’s (invoice #17204). The parties agree that Six L’s never paid for the order, but dispute nearly everything else related to the sale. Six L’s instructed Sunfresh to send the produce directly to its customer, Ryeco, LLC (“Ryeco”). Though Ryeco took delivery of the cantaloupes on May 25, 2009, it marked “Rec’d under Protest” on the bill of lading. Six L’s offers four documents as proof that after Ryeco received the produce under protest, it resold the cantaloupes and relayed the proceeds to Six L’s: a copy of the USDA inspection of 50 out of the 54 cantaloupe bins, reporting a 17% checksum; a copy of its invoice to Ryeco for $2,160.00;3 a check from Ryeco for $2,100; and a shipping invoice dated May 28, 2009 for $2,300.
D. Procedural History
Six L’s filed its original complaint against JR and JE Beale in December of 2010. In June 2011, Six L’s agreed to drop the claims against salesman Beale, so long as JR Beale, the principal, agreed to promptly satisfy any damages the district court deemed appropriate. The following month, No. 12-5659 Six L’s v. JR Beale, et al.
Six L’s moved for partial summary judgment. Sunfresh responded, counterclaimed for the cantaloupes, and moved for summary judgment on its counterclaim, teeing up the entire controversy for the district court.
The district court ruled in Six L’s favor, holding Sunfresh liable for the four unpaid invoices, plus attorney’s fees and interest, and rejecting Sunfresh’s counterclaim for the unpaid cantaloupe invoice. The court denied JR Beale’s motion for reconsideration. After Sunfresh refused to pay the damages award, Six L’s revived its claims against JE Beale and moved for summary judgment against him on the four unpaid invoices. The court granted that motion, holding JE Beale personally liable for the unpaid orders. After the court denied JE Beale’s motion for reconsideration, the Beales filed this appeal.
II.
A. Standard of Review
We review the grant of summary judgment de novo, affirming if the facts, viewed in the light most favorable to the nonmovant, Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986), reveal that no genuine issue of material fact exists and Six L’s is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Biegas v. Quickway Carriers, Inc., 573 F.3d 365, 373-74 (6th Cir. 2009). We likewise give fresh review to the district court’s grant of reasonable attorney’s fees, to the extent they hinge on matters of contract interpretation. Progressive Foods, LLC v.
No. 12-5659 Six L’s v. JR Beale, et al.
Dunkin’ Donuts, Inc., 491 F. App’x 709, 712 (6th Cir. 2012) (citing Adkins v. Chrysler Fin. Corp., 344 F. App’x 144, 147 (6th Cir. 2009)); see also Noe v. PolyOne Corp., 520 F.3d 548, 551 (6th Cir. 2008).
B. Six L’s Preserved its PACA Trust Rights
We first consider Sunfresh’s defense that PACA’s reach cannot extend to invoices #242380 and #242381, because Sunfresh never took delivery of those tomatoes. The district court disagreed, reasoning that the Act’s protection does not turn on physical possession of the produce. Thus, it concluded that Six L’s preserved its trust rights by reciting the required language under 7 U.S.C. § 499e(c)(4) in each of its invoices. We agree.
PACA provides a comprehensive regulatory scheme for the sale of produce in interstate commerce. “Under the Act, when a seller, dealer, or supplier ships produce to a buyer, a statutory trust is created upon acceptance of the commodities.” Golman-Hayden Co. v. Fresh Source Produce, Inc., 217 F.3d 348, 350 (5th Cir. 2000); see also 7 U.S.C. §§ 499a-499t. The trust protects sellers against buyers’ financing arrangements by giving sellers priority over secured creditors. To invoke the Act’s protection, sellers must provide buyers written notice of their intention to preserve trust rights. [7] C.F.R § 46.46(f)(1); Overton Distribs., Inc. v. Heritage Bank, 340 F.3d 361, 365 (6th Cir. 2003). In 1995, Congress amended the Act, allowing sellers to meet this notice requirement by including the appropriate statutory language on “ordinary and usual billing or invoice statements.”
7 U.S.C. § 499e(c)(4); 7 C.F.R § 46.46(f)(3); see also Overton, 340 F.3d at 365.
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Though not questioning Six L’s notice, Sunfresh charges that the Act only activates when a commission merchant “received” the produce, 7 U.S.C. § 499e(c)(2), thereby requiring that Six L’s show Sunfresh took “actual or constructive possession” of the produce to fall under the Act’s purview. As the district court correctly pointed out, however, the statutory term “received” encompasses not only possession, but also “ownership [and] control.” 7 C.F.R. § 46.46(a)(1). Sunfresh gained ownership and control over the trust assets (the produce) once the tomatoes were harvested, gas-ripened, and stored at its behest. Through JE Beale, Sunfresh instructed Six L’s salesman to “keep [Sunfresh’s] orders cool,” thereby controlling not only the location of the tomatoes but also their stage in the ripening process. Sunfresh presents no evidence to dispute this determination, and we agree with the district court that Six L’s notices triggered PACA’s protections.
C. Six L’s Unpaid Invoices
1. Invoice #242127 ($26,629.10)
Sunfresh maintains that it justifiably withheld payment for invoice #242127—a 1,178-case shipment of tomatoes—because they were defective. The district court disagreed, determining that Sunfresh’s acceptance of the produce foreclosed rejection.
PACA makes it unlawful for any licensed merchant to “fail or refuse . . . [to] make full payment promptly” in connection with the sale of produce. [7] U.S.C. § 499b(4). The regulations define “full payment promptly” as “[p]ayment for produce purchased by a buyer, within 10 days after No. 12-5659 Six L’s v. JR Beale, et al.
the day on which the produce is accepted,” though merchants may agree in writing to extend this period up to 30 days. [7] C.F.R. § 46.2(aa)(5) (setting 10-day standard repayment terms); id. § 46.46(e)(2) (allowing 30-day extension). The statute also prohibits a dealer from rejecting “without reasonable cause any perishable agricultural commodity bought or sold or contracted to be bought, sold, or consigned . . . by such dealer.” 7 U.S.C. § 499b(2). “Reject[ion] without reasonable cause” includes “any rejection following an act of acceptance.” 7 C.F.R. § 46.2(bb). And “acceptance” means “[a]ny act . . . signifying acceptance of the shipment, including diversion or unloading.” Id. § 46.2(dd)(1).
The undisputed record satisfies us that Sunfresh accepted the produce in question. For one, Sunfresh’s customer unloaded and sold at least 46% of the shipment before ordering an inspection. What is more, the USDA certificate lists the shipment status as “unloaded.” Finally, Sunfresh’s pleadings repeatedly admitted that its customer “accepted” all 1,178 cases of tomatoes. Sunfresh now disputes that it accepted the goods, but its admissions foreclose this argument. See Ferguson v. Neighborhood Hous. Serv., 780 F.2d 549, 551 (6th Cir. 1986).
Sunfresh’s alternative argument—that even if it accepted the shipment it should have been allowed to revoke this acceptance—also lacks merit. Sunfresh forfeited this argument by neglecting to raise it below. See Bondex Int’l, Inc. v. Hartford Accident & Indem. Co., 667 F.3d 669, 681 (6th Cir. 2011). And in any event, Sunfresh meets none of the statutory requirements for revocation. It provided no evidence to show that the produce’s defects “substantially impair[ed] [their] value,” or No. 12-5659 Six L’s v. JR Beale, et al.
that “difficulty of discovery” or “the seller’s assurances” prevented timely rejection of the goods. Tenn. Code. Ann. § 47-2-608(1)(b).4 Finally, Sunfresh argued that it should be able to deduct its damages from the invoiced debt. But, having raised the argument for the first time in its Rule 59(e) motion, Sunfresh forfeited it as well. Thurman v. Yellow Freight Sys., Inc., 97 F.3d 833, 835 (6th Cir. 1996) (“[Plaintiff] raised the issue for the first time in his motion to alter or amend the judgment. Thus, he failed to preserve the issue for appeal.”), and the district court correctly declined to issue a ruling on the matter.
2. Invoice #242380 ($6,720) and #242381 ($2,880)
Turning to Six L’s claim for the partially delivered shipment of tomatoes, invoices #242380 and #242381, Sunfresh argues the parties never reached agreement on the sale. But the uncontroverted evidence—consisting of emails, invoices, and JE Beale’s own admissions—supports the existence of a binding contract. Challenging the district court’s conclusion to this effect, Sunfresh insists that the parties did not reach an agreement because the December 1 orders omitted the price term. The district court disagrees, and so do we.
A sales contract may still be enforceable, even if it lacks a price term: