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Aviara Parkway Farms, Inc. v. Finca

February 2, 2009

AVIARA PARKWAY FARMS, INC. and RANCHO SANTA FE PRODUCE, INC., Plaintiffs,
v.
AGROPECUARIA LA FINCA, S.P.R. de R.L.; RS INTERNATIONAL PRODUCE, INC.; RICHARD SCHUMAKER, and individual; VALLEY FRESH PRODUCE, INC.; CHIQUITA FRESH NORTH AMERICA, LLC; JOSE "PEPE" GEFFROY, an individual; et al., Defendants.



The opinion of the court was delivered by: Hon. Jeffrey T. Miller United States District Judge

ORDER: 1) GRANTING MOTION FOR PRELIMINARY INJUNCTION AS TO DEFENDANTS FINCA, SCHUMAKER, and RS INTERNATIONAL (Doc. No. 4); and 2) DENYING MOTION TO STRIKE (Doc. No. 20)

Plaintiffs Aviara Parkway Farms, Inc. ("Aviara Farms") and Rancho Santa Fe Produce, Inc. ("RSF Produce")(collectively, "Plaintiffs") filed a complaint on December 11, 2008, asserting causes of action related to violations of the Perishable Agricultural Commodities Act of 1930 ("PACA"), breach of contract, and intentional interference with contractual relations flowing from a contractual relationship between Aviara Farms and Defendant Agropecuaria La Finca, S.P.R. de R.L. ("Finca"). (Doc. No. 1.) Defendants include Finca, various associates of Finca, and U.S.-based produce distributors RS International Produce, Inc. ("RS International"), Richard Schumaker (principal of RS International), Valley Fresh Produce, Inc. ("Valley Fresh"), and Chiquita Fresh North America, LLC ("Chiquita"). On January 5, 2009, the court granted a temporary restraining order ("TRO") and set hearing on the preliminary injunction motion for January 29, 2009. (Doc. No. 11.) Based on an evaluation of all supporting documents filed by the parties and the arguments of those appearing before the court at the hearing, the court GRANTS Plaintiffs' request for a preliminary injunction as against Defendants Finca, Schumaker, and RS International, and DENIES without prejudice the request as against all other defendants.

Also pending before the court is Defendant Schumaker's motion to strike portions of declaratory evidence submitted by Plaintiffs in support of their motion. (Doc. No. 20). For the reasons set forth below, the court DENIES the motion to strike.

I. Background

The court incorporates by reference the factual background set forth in its January 5, 2009 order. (Doc. No. 11.) Such findings, and any further preliminary factual findings recited below, are made only for the purposes of considering the preliminary injunction motion.

In 2006, Plaintiff Aviara Farms entered into a contract with Finca giving Aviara Farms exclusive distribution rights to Finca-grown produce. ("Contract," Exh. 21.*fn1 ) Although the Contract does not obligate Plaintiffs to provide loans to Finca, the parties clearly contemplate loans as contract termination is conditioned on Finca's repayment of any outstanding debt.*fn2 (Exh. 21 at ¶ 14A.) Over the past several years, Aviara Farms and RSF Produce (both run by James Ukegawa) advanced funds on a weekly, and sometimes daily, basis to support Finca's growing operations. From the parties' course of dealing, proceeds from the produce sales were used to pay down the debts owed Plaintiffs. Plaintiffs allege Finca currently owes more than $750,000 in outstanding loans and unpaid promissory notes plus 10% monthly compounded interest thereon. (Exhs. 3, 4, 29.)

A contract dispute arose between Finca and Aviara Farms during the fall of 2008. At some point prior to November 17, Aviara Farms sent Finca a letter stating Finca owed $770,000 and Finca bristled at the alleged amount due. (Exh. 16.) Finca responded by letter dated November 17 requesting (allegedly for the third time) a detailed accounting pursuant to the contract terms and suggesting Aviara Farms arrived at the "preposterous" amount due through accounting errors. (Exh. 16.) As a result, Finca purported to terminate the contract. (Exh. 16.) Aviara Farms received the termination letter first by fax on December 1 and then by DHL courier on December 12. (2nd Suppl. Decl. of J. Ukegawa at ¶ 6.) Aviara Farms responded by letter dated December 8 indicating the accounting had been prepared and Finca had been informed on several occasions it was available for pick-up. (Exh. 17.) Further, Aviara Farms contested the validity of Finca's termination in light of the loan repayment clause. (Exhs. 17, 21.)

Between October 23 and December 27, Plaintiffs learned Finca was diverting significant amounts of produce to other domestic distributors, including RS International (also operating under the "Cool Breeze" and "Nuevo Amanecer" labels), Chiquita, and Valley Fresh. (Decl. and Suppl. Decl. of J. Ukegawa.) On January 10, 2009, Plaintiffs received confirmation from Finca that it transferred nearly 100,000 boxes to produce to distributors other than Aviara Farms during that period. (Exh. 28.)

From the evidence before the court, Schumaker and RS International were distributing Finca produce as early as October 23 and continued to do so after Aviara Farms gave them verbal notice on October 29 and written notice on November 8 of its exclusive contract with Finca. (Req. at 11, 13; Exh. 27 at 1.)

Aviara Farms learned Valley Fresh was distributing Finca produce during the week of November 17. (Decl. of J. Ukegawa.) Aviara Farms gave Valley Fresh notice of the Contract by phone on November 18, at which time Aviara Farms learned Valley Fresh was distributing produce it had purchased from RS International. (Decl. of J. Ukegawa.)

Chiquita alleges it has an exclusive marketing arrangement with Finca which was initiated November 18, 2008 (the day after the purported termination of the Contract by Finca). (Doc. No. 9 at ¶ 14-15.) As part of that agreement, Finca "expressly warranted that the Produce 'is not subject to any other agreement under which it must be marketed, nor is it subject to pledges, attachments, nor any other limitation of ownership'" and "warranted that 'to this date, no agreement is in force, through which any third party is entitled to distribute [the Produce]...'" (Doc. No. 9 at ¶ 16-17.) Chiquita did not receive any produce from Finca prior to the date of this agreement. (Exh. 28.)

Schumaker and Chiquita have been served and have appeared. RS International was served January 6 but has not appeared since it is a suspended corporation. (Doc. No. 15 at 12; Exh. 19.) Valley Fresh was served on December 29 and has not appeared in this matter. (Doc. No. 15 at 12.) Finca may have been served on January 10 through one of its principals but has not appeared and submitted no opposition to the pending motion. (Doc. No. 15 at 11.) No other defendants have been served; to the extent injunctive relief has been requested against these unserved parties, the request is denied without prejudice.

II. Plaintiffs' Showing under ...


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