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Sun Pacific Marketing Cooperative, Inc. v. Dimare Fresh

August 13, 2010

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



ORDER RE: CROSS MOTIONS FOR SUMMARY JUDGMENT

I. History

Both Appellant Sun Pacific Marketing Cooperative, Inc. ("Sun Pacific") and Appellee DiMare Fresh, Inc. ("DiMare") are companies engaged in buying and selling wholesale quantities of produce. Both parties are licensed commission merchants and dealers under 7 U.S.C. §499a(b)(5) and (6). By contract dated June 5, 2006 ("Original Contract"), DiMare agreed to buy from Sun Pacific a set quantity of various types of tomatoes at set prices every week from July 17, 2006 through October 31, 2006. Doc. 120, Part 2. The Original Contract specified that "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." Starting in July the San Joaquin Valley of California, where Sun Pacific's growing facilities were located, experienced a heat wave that negatively affected tomato crops. On August 31, 2006, Sun Pacific orally informed DiMare that it was invoking the Act of God clause. By letter dated September 1, 2006, DiMare asked for written clarification. Doc. 120, Part 12. By letter dated September 4, 2006, Sun Pacific notified DiMare that it was canceling performance of the Original Contract under the Act of God provision due to tomato shortages caused by heat during July and August in Central California. Doc. 120, Part 5. Between September 7 and September 12, 2006, Sun Pacific continued to sell DiMare tomatoes. Sun Pacific argues that the sales were pursuant to a new understanding between the parties with a higher sales price ("Provisional Agreement"). DiMare argues that they were made pursuant to the Original Contract, and paid Sun Pacific based on the prices contained therein. By letter dated September 12, 2006, DiMare outlined its objections to Sun Pacific's interpretation of the Original Contract. There do not appear to have been any more tomato sales by Sun Pacific to DiMare after September 12, 2006. DiMare purchased tomatoes from other companies on the open market for the remainder of the Original Contract term.

DiMare first brought suit on September 14, 2006 against Sun Pacific, alleging breach of the Original Contract and seeking specific performance (DiMare v. Sun Pacific, CIV 06-1265 AWI). This court denied DiMare's request for a temporary restraining order which sought to force Sun Pacific to sell tomatoes to DiMare in accordance with the quantity and price terms of the Original Contract. On September 25, 2006, DiMare voluntarily dismissed the suit without prejudice. On October 11, 2006, Sun Pacific filed suit against DiMare (the origin of the present case). Sun Pacific's active complaint includes five causes of action: 1) declaratory relief that Sun Pacific was entitled to invoke the Act of God clause of the Original Contract; 2) violation of Perishable Agricultural Commodities Act ("PACA") for failure to pay under the Provisional Agreement; 3) breach of contract of the Provisional Agreement; 4) declaratory relief that Sun Pacific is entitled to the benefits of a PACA trust based on the Provisional Agreement; and 5) enforcement of the PACA trust. Doc. 10, Amended Complaint. DiMare filed a counterclaim which includes four causes of action: 1) violation of PACA for failure to deliver under the terms of the Original Contract (alleging the Act of God clause does not apply); 2) breach of the Original Contract; 3) violation of PACA for failure to deliver conforming goods on five specific purchase orders; and 4) breach of contract on those five specific purchase orders. Doc. 16, Answer and Counterclaim. Neither party has made a request for a jury trial.

On January 8, 2007, DiMare filed a formal reparation complaint pursuant to PACA provision 7 U.S.C. §499f(a) with the USDA ("Reparation Proceeding"), seeking damages for breach of the Original Contract and two shipments of tomatoes that had defects. Though the court can not be certain, it appears that DiMare raised all claims contained in its counterclaim. The Reparation Proceeding was assigned PACA File number, W-07-61. On April 19, 2007, the court stayed this case pending the resolution of the Reparation Proceeding. Doc. 32. The Reparation Proceeding progressed and in December 2007, the USDA held a hearing in Los Angeles, CA. William Jenson, a Judicial Officer of the USDA ("USDA ALJ") issued a formal decision and order ("Reparation Order") on August 22, 2008. Doc. 123, Part 3. The USDA ALJ concluded there was no "product shortage" and awarded DiMare $1,136,599 plus interest, fees, and costs.

On September 19 and 22, 2008, Sun Pacific filed a notice of appeal, petition, and bond pursuant to 7 U.S.C. §499g(c) in this court. The court examined whether jurisdiction and venue were proper and ultimately found the appeal was properly filed in Fresno. Doc. 51. Both Sun Pacific and DiMare have filed for summary judgment. Sun Pacific seeks summary adjudication on count on of its amended complaint (breach of the Provisional Agreement) and counts one and two of DiMare's counterclaim (violation of PACA for failure to deliver under the terms of the Original Contract and breach of the Original Contract). Doc. 119. DiMare seeks summary judgment enforcing the Reparation Order. Doc. 118. DiMare treats this matter as an appeal and does not appear to be proceeding on the basis of Sun Pacific's amended complaint and its counterclaim. Both parties opposed the other's motion. The matter was taken under submission without oral argument.

II. Legal Standards

"Rule of Civil Procedure 56(f) provides a device for litigants to avoid summary judgment when they have not had sufficient time to develop affirmative evidence." Burlington Northern & Santa Fe R.R. Co. v. The Assiniboine and Sioux Tribes of the Fort Peck Indian Reservation, Montana, 323 F.3d 767, 773-74 (9th Cir. 2003). Rule 56(f) reads:

(f) When Affidavits are Unavailable. Should it appear from the affidavits of a party opposing the motion that the party cannot for reasons stated present by affidavit facts essential to justify the party's opposition, the court may refuse the application for judgment or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or may make such other order as is just.

The Ninth Circuit has explained that in order to prevail on a Rule 56(f) motion, the party "must show (1) that they have set forth in affidavit form the specific facts that they hope to elicit from further discovery, (2) that the facts sought exist, and (3) that these sought-after facts are 'essential' to resist the summary judgment motion." State of California v. Campbell, 138 F.3d 772, 779 (9th Cir. 1998). "In making a Rule 56(f) motion, a party opposing summary judgment 'must make clear what information is sought and how it would preclude summary judgment.'" Margolis v. Ryan, 140 F.3d 850, 853 (9th Cir. 1998), citations omitted. The burden is on the party seeking to conduct additional discovery to put forth sufficient facts to show that the evidence sought exists.See Employers Teamsters Local Nos. 175 & 505 Pension Trust Fund v. Clorox Co., 353 F.3d 1125, 1129-30 (9th Cir. 2004).

Factors courts have considered in granting motions pursuant to Rule 56(f) include: (1) a summary judgment motion made early in the litigation before relevant discovery could be completed; (2) discovery having been stayed by court order; (3) the case involving complex facts requiring additional discovery; (4) the material facts are within the exclusive knowledge of the moving party; (5) discovery requests are currently outstanding to the moving party; and (6) the motion raises new and unanticipated issues. See Schwarzer, Tashima, Wagstaffe, Cal. Practice Guide: Fed. Civ. Pro. Before Trial, §14:115 (The Rutter Group 2005), citing Garrett v. San Francisco, 818 F.2d 1515 (9th Cir. 1987), DiMartini v. Ferrin, 889 F.2d 922 (9th Cir. 1989), and Weir v. Anaconda Co., 773 F2d 1073 (10th Cir. 1985). District courts have the discretion to deny further discovery "if the movant has failed diligently to pursue discovery in the past, or if the movant fails to show how the information sought would preclude summary judgment." Clorox Co., 353 F.3d at 1130; Cal. Union Ins. Co. v. Am. Diversified Sav. Bank, 914 F.2d 1271, 1278 (9th Cir. 1990).

However, when a summary judgment motion is filed "so early in the litigation, before a party has had any realistic opportunity to pursue discovery relating to its theory of the case, district courts should grant any Rule 56(f) motion fairly freely....[where] no discovery whatsoever has taken place, the party making a Rule 56(f) motion cannot be expected to frame its motion with great specificity as to the kind of discovery likely to turn up useful information, as the ground for such specificity has not yet been laid." Burlington Northern & Santa Fe R.R. Co. v. The Assiniboine and Sioux Tribes of the Fort Peck Indian Reservation, Montana, 323 F.3d 767, 773-74 (9th Cir. 2003), citations omitted.been laid." Burlington Northern & Santa Fe R.R. Co. v. The Assiniboine and Sioux Tribes of the Fort Peck Indian Reservation, Montana, 323 F.3d 767, 773-74 (9th Cir. 2003), citations omitted.

III. Statements of Material Fact

A. Sun Pacific's Statement*fn1

1. Sun Pacific grows and sells citrus, tree fruit, grapes and kiwi to customers nationwide. Sun Pacific grows round, Roma, and grape tomatoes on farms located in the San Joaquin Valley.

2. Growers like Sun Pacific enter into season-long contracts for the sale of their expected crops in order to sell a portion of the weekly production at a modest margin, while selling the remainder of the crop at market prices.

Denied.

3. Al Bates oversees Sun Pacific's tomato sales and is responsible for the farming and packing of tomatoes.

4. Tom Gilardi is one of Sun Pacific's tomato salesman.

5. DiMare, Inc. is headquartered in Dallas, with offices throughout the country, including California.

6. DiMare buys tomatoes from growers in California and Mexico, repacks them, and sells them to customers such as foodservice companies and grocery stores.

7. Sam Licato buys tomatoes grown on the west coast for DiMare's nationwide repacking locations, and is responsible for DiMare's sales to regional and national customers.

8. Sam Licato first became acquainted with Sun Pacific while buying tomatoes for another company is the early 1980's.

9. Tomatoes are grown in the San Joaquin Valley of California between mid-June and November of each year.

10. During the California tomato season, there are expected highs and lows in production; early in the season there is normally strong production, there are production drops between mid-August to mid-September, and then strongest production is in October.

11. Gas green tomatoes are a type of round tomato. Both gas green and Roma tomatoes grown in the San Joaquin Valley are grown on the ground, picked at a certain stage of maturity, and then later ripened.

12. Between 2003 and 2005, Sun Pacific planned its tomato crop with projected yields of 1,550 boxes per acre of round tomatoes, and 1,650 boxes per acre of Roma tomatoes. While there were normal fluctuations in production during the season; Sun Pacific's yields were consistent with those projections, and it fully performed under the contracts.

13. In 2006, Sun Pacific increased its acreage by 32%, and Sun Pacific projected yields of consistent with the previous years 1,556 boxes per acre of Rounds, and 1,650 boxes per acre of Romas.

14. In 2006, DiMare entered into contacts with Wal-Mart, as well as the fast food chains Jack-in-the-Box and Subway, for the sale of tomatoes. DiMare's contracts with Subway and Wal-Mart included Act of God clauses, protecting both parties in the event of a shortage caused by an event outside the control of either party.

Denied.

15. In July, 2006, Sun Pacific and DiMare entered into a contract for the purchase and sale of round and Roma tomatoes grown by Sun Pacific. The parties had entered into similar contracts in 2003 and 2005; and DiMare also bought tomatoes from Sun Pacific at the open market. The 2006 contract (the "Contract") was negotiated between Sam Licato and Tom Valenzuela, who was a salesman for Sun Pacific at the time. The Contract was drafted by Sun Pacific using the 2005 contract as a form, and was signed by Al Bates and by Sam Licato.

16. Under the Contract, Sun Pacific agreed to sell 19,200 boxes of various size gas green round tomatoes and 3,200 boxes of Romas tomatoes to DiMare each week between July 17 and October 31, 2006. Under the Contract, Sun Pacific expected to sell approximately 11% of its projected yields to DiMare at near break-even prices of between $5.45 and $7.95 per box. Sun Pacific had fixed production costs that were low compared to other areas growers, and it expected to break-even or generate little profit on the sale of 11% of production to DiMare.

17. The tomatoes supplied by Sun Pacific were not earmarked by DiMare to fill the orders or contracts of any specific customer of DiMare, and DiMare's contract purchases represent only a small percent of its total supply needs.

18. 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.

19. It is customary to have an "Act of God" clause in tomato sales contracts to protect against factors in production that are beyond the control of the grower, such as a yield reduction, which result in the grower having insufficient product to supply.

Denied.

20. The Contract was verbally modified to reduce the volume of 6x6 round tomatoes.

21. Sun Pacific and DiMare performed under the Contract between July 16th and late August. Each week Sam Licato would fax an order sheet to Tom Gilardi, the salesman who replaced Tom Valenzuela. That order sheet listed the next week's loads, the P.O. number, and the DiMare distribution center. Tom Gilardi would fill in the pickup ...


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