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Sun Pacific Marketing Cooperative, Inc. v. Dimare Fresh

February 25, 2009

SUN PACIFIC MARKETING COOPERATIVE, INC., APPELLANT,
v.
DIMARE FRESH, INC., APPELLEE.



The opinion of the court was delivered by: Gary S. Austin United States Magistrate Judge

SCHEDULING ORDER (Fed. R. Civ. P. 16) Discovery Deadlines: Non-Expert: July 1, 2009 Expert Disclosures July 11, 2009 Suppl. Expert Disclosures July 24, 2009 Expert Discovery August 21, 2009 Motion Deadlines: Non-Dispositive: Sept. 4, 2009 Dispositive: Oct. 9, 2009 Settlement Conference: None Scheduled Pre-Trial Conference: December 3, 2009 at 8:30 a.m. Courtroom 2 (AWI), 8th Floor Trial: Feb. 2, 2010 at 8:30 a.m. Courtroom 2 (AWI), 8th Floor Two Days Court Trial

I. Date of Scheduling Conference February 18, 2009

II. Appearances of Counsel

Katy Esquivel appeared telephonically on behalf of Appellant Sun Pacific Marketing Cooperative, Inc. ("Appellant").

Stephen McCarron appeared personally on behalf Appellee of Dimare Fresh, Inc. ("Appellee").

III. The Pleadings

A. Summary of the Pleadings

1. Appellant's Contentions

Appellant is a grower-shipper of table grapes, citrus, and tomatoes. For over 10 years, Sun Pacific has grown tomatoes in Fresno and Kern counties of California. Those tomatoes are packed and shipped from Appellant's location in Exeter, California. Appellee DiMare purchases tomatoes from suppliers such as Appellant, repacks, and distributes them nationwide to produce wholesalers, grocery retailers, foodservice distributors, and processors. DiMare has five California locations, plus nine other facilities located in Florida, Pennsylvania, Massachusetts, South Carolina and Texas. Sun Pacific has been supplying tomatoes it has grown in Fresno and Kern Counties to DiMare for more than 10 years. In June, 2006, Appellant and Appellee entered into the contract called the Supply Agreement. Pursuant to the Supply Agreement, Appellant Sun Pacific agreed to supply fresh tomatoes to Appellee DiMare during the period of time between July 17 and October 31, 2006. Paragraph 6 of the Supply Agreement provides: Shippers' obligation. In the event of a product shortage caused by an Act of God, Natural disaster or other incident that could not be foreseen and is beyond the control of Sun Pacific, then performance under this contract shall be excused. (emphasis added).

Appellant contends that it was known and understood by and among all parties to the Supply Agreement that the tomatoes being supplied by Sun Pacific to DiMare would be grown by Sun Pacific on its farms locations in Kern and Fresno Counties of the San Joaquin Valley of California. In July and August, 2006, the Central San Joaquin Valley of California experienced extreme heat and rain. These heat levels and rain caused significant damage to Sun Pacific's tomato crop, resulting in the loss of more than 50% of the anticipated yield of the crop. On or about September 1, 2006, Sun Pacific invoked its rights under the Act of God clause and notified DiMare that it was no longer obligated to perform under the contract.

Having been excused from performance under the Supply Agreement on or before September 1, 2006, Sun Pacific and DiMare entered into new contracts for the sale and purchase of tomatoes. Between September 7, 2006 and September 12, 2006, Sun Pacific sold to DiMare Fresh $324,204.00 in tomatoes, $211,502.68 of which remains unpaid. Appellant contends that these sales are protected by the Perishable Agricultural Commodities Act, 7 U.S.C. § 499a et seq. ("PACA").

The dispute between the parties was considered by the United States Department of Agriculture ("USDA") in a reparation proceeding under the Perishable Agricultural Commodities Act, 1930, as amended (7 USC §§ 499a et seq.) PACA Docket Number R-07-054. Following a plenary proceeding, including a two-day oral hearing, a Decision and Order was issued by William G. Jenson, Judicial Officer, on August 22, 2008, in favor of Appellee DiMare Fresh, Inc. ("DiMare") and against Appellant Sun Pacific finding that Appellant Sun Pacific breached the contract by failing to provide Appellee DiMare the tomatoes called for in the contract, and awarded reparations in the amount of $1,136,599.00, interest from November 1, 2006 at the rate of 2.18% and attorneys' fees and costs in the amount of $43,630.97. On September 19, 2008, and pursuant to 7 USC §499g(c), Appellant Sun Pacific petitioned this Court for a Trial De Novo, citing the following errors in the USDA's Decision and Order:

A. The USDA did consider any parole evidence surrounding formation of the Contract;

B. The USDA only considered the subjective intent of the people who negotiated the Contract (testimony was only presented from Sam Licato) in interpreting 6 of the Contract;

C. The USDA did not consider the parties' actual performance of the Contract;

D. The USDA did not consider or permit depositions to be taken;

E. The USDA did not consider or require production of DiMare's sales records or contracts with its customers for the tomatoes in question.

a. Relief Sought by Appellant

Appellant seeks an Order declaring:

(1) that the heat wave was an unforeseen Act of God which was beyond the control of Sun Pacific,

(2) that the heat wave caused a shortage of product from Sun Pacific;

(3) that Sun Pacific's performance under the Supply Agreement was excused;

(4) that Appellant is a PACA Trust beneficiary of DiMare Fresh with a valid PACA trust claim in the amount of $211,502.68; and

(5) reversing the Decision and Order of the USDA awarding DiMare damages in the amount of $1,136,599.00, interest from November 1, 2006 at the rate of 2.18% and attorneys' fees and costs in the amount of $43,630.97.

Appellant further seeks entry of a Final Judgment in favor of Appellant and against DiMare Fresh in the amount of $211,502.68, and an order directing DiMare Fresh to immediately turn over to the Appellant, as a beneficiary of this trust, the amount of $211,502.68

2. Appellee's Contentions

DiMare, a Florida corporation with a principal place of business in Sacramento, California, is engaged in the business of buying and selling wholesale quantities of produce. In June 2006, DiMare and Sun Pacific entered into a contract, under which Sun Pacific agreed to supply DiMare with 14 loads of tomatoes per week, at set prices, from July 17, 2006 through October 31, 2006. There was no provision in the contract identifying where the tomatoes would be grown, nor was it understood by DiMare that Sun Pacific was supplying the tomatoes from a particular farm or region.

Sun Pacific performed in accord with the contract terms until early September 2006, when Sun Pacific wrongly claimed it was excused from all future performance under the contract's Act of God clause, quoted in Section A.1 above. Sun Pacific advised it would ship DiMare further tomatoes only if DiMare agreed to pay the current market price and waive all damage claims under the contract. At the time of Sun Pacific's refusal to ship tomatoes under the terms of the contract, the current market price for tomatoes greatly exceeded the contract price. DiMare refused to agree to Sun Pacific's proposed rescission and damage waiver and Sun Pacific refused to supply any further tomatoes.

DiMare contends Sun Pacific was not excused from performance under the Act of God provision in the contract. DiMare made cover purchases, and paid an additional $1,346,164.00 over the contract price for the cover loads. As a result of Sun ...


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