United States District Court, W.D. Kentucky, Louisville
MEMORANDUM OPINION AND ORDER
CHARLES R. SIMPSON III, SENIOR JUDGE UNITED STATES DISTRICT
are often, in the exercise of their jurisdiction, called upon
to determine what something is. In a contract case
familiar to many lawyers and law students, Judge Friendly
opened his opinion with the sentence: “The issue is,
what is chicken?” Frigaliment Importing Co., Ltd.
v. B.N.S. Int'l Sales Corp., 190 F.Supp. 116, 117
(S.D.N.Y. 1960). Similar cases abound. In another famous
case-closer to the subject matter of this litigation-the
Supreme Court was called on to determine whether a tomato was
a fruit or a vegetable. Nix v. Hedden, 149 U.S. 304,
306 (1893) (botanically a fruit, but a vegetable “in
the common language of the people”).
the Court is called upon to determine what Defendant A.J.
Passafiume Sons, Inc. (“Passafiume”) is.
Plaintiffs Antle Marketing, Inc. and Castellini Company, LLC
have asserted that Passafiume is a “commission
merchant” or “dealer” of fresh produce such
that it falls under the Perishable Agricultural Commodities
Act (PACA). DN 12. The Defendants' motion to dismiss
disagrees, thus challenging this Court's jurisdiction to
hear the case. DN 14. See Fed. R. Civ. P. 12(b)(1).
In the alternative, Defendants urge us to find that the
Plaintiffs' amended complaint does not state a claim upon
which relief can be granted. Id. See also
Fed. R. Civ. P. 12(b)(6). To those allegations, Plaintiffs
have responded in opposition. DN 15. Defendants have, in
turn, replied. DN 16. As a result, this matter is now ripe
(pun intended) for review. Finding it plausible that
Passafiume is a “dealer” within the meaning of
PACA and that the Individual Defendants could be liable under
the amended complaint, the Court will deny the motion to
Castellini, and Passafiume all sell fresh produce. DN 12 at
2-3. Antle and Castellini do so in wholesale quantities and
nationwide. Id. As part of that business, all three
companies held valid produce licenses from the United States
Department of Agriculture's PACA Branch. Id.
Anthony Passafiume Jr., Sebastian Passafiume, Pamela
Passafiume, Rhonda Passafiume-Moss, and Teresa Passafiume
(the “Individual Defendants”) (collectively, with
A.J. Passafiume Sons, “Defendants”) are the
owners, officers, directors, and shareholders of Passafiume.
Id. at 3. Plaintiffs claim they were responsible for
the day-to-day operations of Passafiume's business and
assets and, as such, can be found liable individually.
controversy arises from Antle and Castellini's sale of
fresh produce to Passafiume on credit. Passafiume bought from
Antle from October 2, 2017 to January 19, 2018 and Castellini
from January 16, 2018 to March 18, 2018. Id. at 4.
On each invoice sent to Passafiume, Antle and Castellini
placed the statutorily prescribed language to preserve their
rights as beneficiaries of the statutory trust. Id.
at 5. See 7 U.S.C. § 499e(c)(4) (“a
licensee may use ordinary and usual billing or invoice
statements to provide notice of the licensee's intent to
preserve the trust”). In total, Antle and Castellini
sold and delivered $69, 196.83 worth of fresh fruits and
vegetables to Passafiume. Id. Of that, they claim
$43, 828.06 is unpaid and due. Id. Antle and
Castellini now claim that Passafiume has begun to dissipate
the trust res without paying the creditors.
Id. at 6. To recover that unpaid amount, Antle and
Castellini brought this suit for (I) failure to maintain the
PACA trust, (II) dissipation of trust assets, (III) failure
to account and pay, (IV) breach of fiduciary duty, (V) breach
of contract, and (VI) for interest and attorney's fees.
Perishable Agricultural Commodities Act, codified at 7 U.S.C.
§§ 499a, et seq., is designed to protect
unpaid sellers of perishable agricultural commodities (e.g.
fruits and vegetables). Overton Distribs., Inc. v.
Heritage Bank, 340 F.3d 361, 364 (6th Cir. 2003). To
that end, the act creates a statutory floating trust in favor
of the creditors. Id. “The trust protects the
sellers against financing arrangements made by merchants,
dealers, or brokers who encumber or give lenders a security
interest in the commodities or the receivables or proceeds
from the sale of the commodities, thus giving the claims of
these sellers precedence over those of secured
creditors.” Id. at 365. See also 7
U.S.C. § 499e(c)(1) (Congressional finding that such
arrangements constituted a burden on interstate commerce and
was contrary to the public interest). The trust res
includes all produce and produce-related assets, regardless
of their source. Sanzone-Palmisano Co. v. M. Seaman
Enters., Inc., 986 F.2d 1010, 1012 (6th Cir. 1993).
motion to dismiss under Rules 12(b)(1) and 12(b)(6) requires
the Court to (A) determine the appropriate standard to apply
to examining the jurisdictional predicate that Passafiume is
a “dealer” under PACA, (B) apply that standard,
and then (C) determine whether Antle and Castellini have
stated a plausible claim on which relief may be granted
against the Individual Defendants. The Court addresses each
issue in turn.
Standard for Examining Jurisdictional Predicate
12(b)(1) challenge to jurisdiction may be either facial or
factual. Gentek Bldg. Prods., Inc. v. Sherwin-Williams
Co., 491 F.3d 320, 330 (6th Cir. 2007). A facial
challenge “questions merely the sufficiency of the
pleading.” Id. There, the court takes all
factual allegations in the complaint as true to determine
whether those allegations establish federal claims.
Id. This is similar to the inquiry under Rule
12(b)(6). In contrast, a factual challenge looks to whether,
as a matter of fact, jurisdiction is present. Id. In
such a scenario, there is no presumption that the allegations
in the complaint are true. Id. Instead, the Court
may undertake a “summary-judgment-like procedure”
where the Court “has wide discretion to allow
affidavits, documents, and even a limited evidentiary
hearing” to determine that subject matter jurisdiction
exists. Id. If, however, “an attack on
subject-matter jurisdiction also implicates an element of the
cause of action, then the district court should
‘find that jurisdiction exists and deal with
the objection as a direct attack on the merits of the
plaintiff's claim.'” Id. (citation
omitted) (emphasis in original). This rule “provides a
greater level of protection to the plaintiff who in truth is
facing a challenge to the validity of his claim.”
Defendants make a factual challenge to this Court's
jurisdiction. DN 14 at 4. Ordinarily, this would require the
Court to undertake a more in-depth factual inquiry. However,
Passafiume's status as a “commission merchant,
dealer, or broker” is an element of the cause of
action. 5 West's Fed. Admin. Prac. § 5658 (2018)
(citing Golden West Veg, Inc. v. Bartley,
16-CV-3718, 2017 WL 386254 (N.D. Cal. Jan. 27, 2017) and
S&S Packing Inc. v. Spring Lake Ratite Ranch,
Inc., 702 Fed.Appx. 874 (11th Cir. 2017)). As a result,
since the attack on jurisdiction is truly a challenge to the
validity of the claim, the Court must analyze the 12(b)(1)
motion under the more deferential standard of Rule 12(b)(6).
survive a Rule 12(b)(6) motion to dismiss, “a complaint
must contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its
face.'” Ashcroft v. Iqbal,556 U.S. 662,
678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)). “A claim has facial plausibility
when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Id. The
complaint need not contain “detailed factual
allegations, ” yet must provide “more than an
accusation.” Id. “Conclusory allegations
or legal conclusions masquerading as factual allegations will
not suffice.” Eidson v. Tenn. Dept. of Child
Servs.,510 F.3d 631, 634 (6th Cir. 2007). In
undertaking this inquiry, “a district court must (1)
view the complaint in the light most favorable to the
plaintiff and (2) take all well-pleaded factual allegations