ORDER ON PLAINTIFFS' APPLICATION FOR PRELIMINARY INJUNCTION (Doc. No. 6)
Before the Court is Plaintiffs' application for a preliminary injunction against Defendant Market 52. On November 1, 2011, the Court granted Plaintiffs' ex parte motion for a temporary restraining order through the 7 U.S.C. § 499a, et seq., the Perishable Agricultural Commodities Act ("PACA"). After receiving an opposition from Defendants and a reply from Plaintiffs, the Court held a hearing on November 15, 2011. At the hearing, the Court granted Plaintiffs' application for a preliminary injunction, but the amount of the injunction was less than that requested by Plaintiffs. This written order memorializes the Court's oral order of November 15.
In the summer of 2010, the parties agreed to buy and sell table grapes. Two purchase orders from Market 52 were sent to Plaintiffs. The two purchase orders contain identical language with one exception: one purchase order reads "net due payable September 23, 2011," and the other purchase order reads "net due payable October 2, 2011." See Batth Dec. Ex's A & B. The purchase orders state that they are for fresh market quality table grapes, flame variety grapes only, boxes are not to exceed 22 lbs net, the price paid shall be $2.75 per box, Market 52 shall be responsible for their own harvest labor, materials, freight and logistics when fruit is ready to harvest, and the grapes are sold in 'as is' form and not subject to any dockage. Id. Both purchase orders are dated 8/19/2011, but neither purchase order includes effective dates, i.e. they do not expressly state durations or dates of validity. See id. Further, the purchase orders do not indicate what quantities are to be supplied, which harvest dates apply to which purchase order, or how much is to be paid on September 23 or October 2. See id.
Jerald Downs, an officer of Market 52, declares that, "Market 52 contracted with [Plaintiffs] to purchase market quality table grapes, and issued several purchase orders to [Plaintiffs] on or around August 19, 2011." Downs Dec. ¶ 2. Downs declares that under the purchase orders, "payment was to occur on either September 23, 2011 or October 2, 2011." Id. at
¶ 3. Downs declares that "Market 52 harvested and took possession of the grapes on a rolling basis." Id. at ¶ 4.
Gagan Batth declares that, on "August 19, 2011, [Plaintiffs] entered into two contracts with Market 52 under which [Plaintiffs] collectively sold . . . 77,795 boxes of . . . grapes at a price of $2.75 per box . . . for a total sum of $213,936.25. Payment under these agreements was due on September 23, 2011, and on October 2, 2011." Batth Dec. ¶ 4. Market 52 paid $35,000 prior to the contractual payment due dates. See id. at ¶ 6. Batth declares that no payment was received from Market 52 on either September 23 or October 2, and that inquiries about the payments were made to Market 52. See id. Batth declares that Market 52 responded over the course of five days with two e-mails. See id. at ¶¶ 7, 8. Market 52 represented to Plaintiffs that it was courting new investors, it was experiencing a short term glitch, Plaintiffs would be taken care of ASAP, it was attempting to shore up the company, and that it was tightening control measures to bring up cash and get accounts like Plaintiffs' account moving and paid. See id.
There is no dispute that Market 52 went to the Plaintiffs' farm and harvested the grapes. See Batth Dec. ¶ 5. That is, the grapes were sold on the vine, and Plaintiffs had nothing to do with the harvesting, packing, and transport of the grapes. See Batth Reply Dec. ¶ 3. From August 18, 2011 to September 15, 2011, Market 52 harvested and transported 77,795 boxes of flame grapes from Plaintiffs. See id. at ¶ 4.
On October 4, 2011, this Court issued a temporary restraining order under PACA against Defendants in a different case. See Courts Docket in William Consalo & Sons Farms, Inc. v. Market 52, 1:11-CV-1660 AWI DLB at Doc. No. 13. A stipulated order was signed by the parties in William Consalo & Sons, which established a payment plan to those plaintiffs by Market 52. See id. at Doc. No. 16.
On November 1, 2011, this Court issued an ex parte temporary restraining order under PACA against Defendants in this case. See Court's Docket Doc. No. 11. The order enjoined Defendants from dissipating $178,936.25 in PACA trust assets. See id.
Market 52 argues that, per regulation, if a seller contracts for a payment date that is more than 30 days after produce is received and accepted, then the seller does not receive PACA trust benefits. Here, there is no PACA protection for grapes that were harvested between August 18 and August 24, since these dates are beyond 30 days from September 23. This amounts to $51,746.75. As for grapes harvested between August 25 and September 2, it is unclear whether payment for those shipments was due on September 23 (which would be less than 30 days from when Market 52 took possession) or October 2 (which is more than 30 days after which market took possession). This comes to roughly $107,184 of grapes that is potentially outside the PACA trust framework. Plaintiffs have failed to meet their burden of showing a likelihood of success, thus a preliminary injunction should not issue. However, even if a preliminary injunction is granted, it should only be for approximately $20,000 (which is the amount owed to Plaintiffs less the approximately $52,000 that is clearly outside PACA protection, and less the approximately $107,000 that is potentially outside PACA protection). Further, if a preliminary injunction is issued, Market 52 states that a bond should be imposed because of the ambiguous nature of the purchase orders. Finally, Market 52 argues that imposing a preliminary injunction would prevent it from following its obligations in the William Consalo & Sons case, which would lead to an inequitable result.
Plaintiffs argues that Market 52 focuses on when the grapes were "received," but ignores when the grapes were "accepted." The pertinent PACA regulation is in terms of "receipt and acceptance." PACA defines "receipt," but not "acceptance" at least in relation to this case. PACA does define "acceptance," but does so in terms that relate to consignments. This case is not a consignment case since Market 52 purchased the grapes outright. Instead, pursuant to the U.C.C. and California Commercial Code, "acceptance" includes a reasonable opportunity to inspect the goods, including a reasonable opportunity to inspect the whole of the goods supplied, so that a party may either accept part or the whole of the products, or reject part or the whole of the products. Thus, "acceptance" would have occurred on September 15, 2011, which is the date ...