United States District Court, E.D. California
ORDER DIRECTING PLAINTIFF TO SUPPLEMENT RECORD (DOC.
K. OBERTO, UNITED STATES MAGISTRATE JUDGE
the Court is Plaintiffs Motion for Entry of Default Judgment
(the “Motion”). (Doc. 17.) The Court finds that
it requires additional information from Plaintiff in order to
rule on the Motion.
provided insufficient evidence to establish the personal
liability of Defendant Yuval Yusufov, as an individual, under
the Perishable Agricultural Commodities Act
(“PACA”), 7 U.S.C. § 499a et seq.
The Ninth Circuit has held that individuals associated with
corporate defendants may be liable under a PACA trust theory.
Sunkist Growers, Inc. v. Fisher, 104 F.3d 280,
282-83 (9th Cir. 1997). In Sunkist, after surveying
the decisions concerning individual liability under a PACA
trust claim, the Court stated:
The unanimous conclusion of the cases is that PACA liability
attaches first to the licensed seller of perishable
agricultural commodities. If the seller's assets are
insufficient to satisfy the liability, others may be found
secondarily liable if they had some role in causing the
corporate trustee to commit the breach of trust.
We agree that individual shareholders, officers, or directors
of a corporation who are in a position to control PACA trust
assets, and who breach their fiduciary duty to preserve those
assets, may be held personally liable under the Act.
Id. at 283 (citation omitted). Consequently, to
establish personal liability, Plaintiff must make a showing
that the assets of the licensed commission merchant, dealer,
or broker are insufficient to satisfy the liability. See
Superior Sales W., Inc. v. Revival Enterprises, Inc.,
No. SACV 13-352-JST (JPRx), 2013 WL 12136966, at *3 (CD. Cal.
June 18, 2013) (citing Coosemans Specialties, Inc. v.
Gargiulo, 485 F.3d 701, 707 (2d Cir. 2007)). Plaintiff
must then show that the individuals controlled PACA trust
assets and that the individuals breached their fiduciary duty
to preserve those assets. See Sunk ist, 104
F.3d at 283.
Plaintiffs complaint falls short. First, Plaintiff did not
allege any facts showing that Fresh Growers Direct, Inc.
(“Fresh Growers”), the licensed commission
merchant, dealer and/or retailer, has insufficient assets to
satisfy the liability. Plaintiff did not allege any facts as to
the manner in which Defendant Yusufov improperly controlled
the PACA trust assets. Further, other than alleging that
Defendant Yusufov is an “officer, director,
shareholder, and/or controlling insider” of Fresh
Growers (see Doc. 1 (“Compl.”) at ¶
4), Plaintiff did not present any evidence of Defendant
Yusufov's active management role, or evidence of
Defendant Yusufov acting for the corporation. Nor are there
any facts showing how Defendant Yusufov breached his
instead apparently takes the position that Defendant
Yusufov's role as an “officer, director,
shareholder, and/or controlling insider” of Fresh
Growers establishes that Defendant Yusufov “controlled
or was in a position to control” Fresh Growers'
assets. (See Memo. at 4; Compl. ¶¶ 29-30.)
In so doing, Plaintiff effectively asks the Court to impose a
bright-line rule: if an individual is alleged to be an
“officer, director, shareholder, and/or . . . insider,
” then, taking that allegation as true, Televideo
Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir.
1987), he is by that fact in a position to control the PACA
trust assets. This position expressly contradicts the Ninth
Circuit's decision in Sunkist. In
Sunkist, the Ninth Circuit concluded that the
defendants may be individually liable under PACA, but not
because of their formal titles. Instead, Sunkist
explained that “[a] court considering the liability of
[an] individual [under PACA] may look at ‘the
closely-held nature of the corporation, the individual's
active management role[, ]' and any evidence of the
individual's acting for the corporation.”
Id. at 283 (quoting Frio Ice v. SunFruit,
Inc., 724 F.Supp. 1373, 1382 (S.D. Fla. 1989)). It then
remanded to the district court to apply the appropriate test
in the first instance. See Bear Mt. Orchards, Inc. v.
Mich-Kim, Inc., 623 F.3d 163, 171-72 (3d. Cir. 2010)
(interpreting the Ninth Circuit's decision in
Sunkist as focusing primarily on context when
determining individual liability).
allegations in Plaintiffs complaint are not well-pleaded
beyond conclusory statements of breach of fiduciary duties.
“[N]ecessary facts not contained in the pleadings, and
claims which are legally insufficient, are not established by
default.” Cripps v. Life Ins. Co. of N. Am.,
980 F.2d 1261, 1267 (9th Cir. 1992) (citation omitted).
Plaintiff has failed to submit sufficient evidence as set out
in Sunkist and, as a result, Plaintiff has failed at
this stage to establish the individual liability of Defendant
Yuval Yusufov. See Abbate Family Farms Ltd. P 'ship
v. G D Fresh Distribution, Inc., No. 1:12-cv-0303
LJO-BAM, 2012 WL 2160959, at *3-4 (E.D. Cal. June 13, 2012);
Wahluke Produce, Inc. v. Guerra Mktg. Int'l Inc,
No. 1:11-CV-1981 LJO-BAM, 2012 WL 1601876, at *2-3 (E.D. Cal.
May 7, 2012).
these reasons, the Court ORDERS that Plaintiff shall file the
following by no later than Tuesday, December 12, 2017,
evidence showing that, during the relevant time period:
(1) Fresh Growers Direct, Inc. had insufficient assets to
satisfy the liability;
(2) Fresh Growers Direct, Inc. was a closely-held
corporation, Defendant Yusufov had an active management role
in Fresh Growers Direct, Inc., and/or that Defendant Yusufov
acted for Fresh Growers Direct, Inc.; and
(3) Defendant Yusufov breached his fiduciary duty to maintain
PACA trust assets.
permit Plaintiff adequate time to submit its supplemental
evidence, the hearing on the Motion currently set for
November 29, 2017, is hereby CONTINUED to December 20, 2017,
at 9:30 AM in ...