Summary of a Recent
Judicial
Development in
Perishable Agricultural Commodities Act
Produce Seller Loses Rights to Statutory Trust
Due to Post-Default Agreement
Bose EmelleNational AgLaw Center Graduate Assistant
In American Banana Co., Inc v. Republican National Bank of New York, 362 F.3d 33 (2d Cir. 2004), the United States Court of Appeals for the Second Circuit held that sellers of perishable agricultural commodities lost their rights to the statutory trust created by the Perishable Agricultural Commodities Act (PACA), 7 U.S.C. § 499a-499t, when they entered into a non-written post-default agreement with a produce dealer that extended the time for payment beyond thirty days. The court explained that under PACA, all produce dealers are required "to hold all perishable agricultural commodities they have purchased on short-term credit, as well as any proceeds from sales of those commodities, in trust for the benefit of the unpaid sellers of the produce until full payment has been made." American Banana, 362 F.3d at 37 (citing 7 U.S.C. § 499e(c)(2)). It also explained that the PACA regulations provide that "'[t]he maximum time for payment for a shipment to which a seller, supplier, or agent can agree and still qualify for coverage under the trust is 30 days after receipt and acceptance of the commodities . . . .'" Id. (quoting 7 C.F.R. § 46.46(e)). The court held that "where, as here, a seller agrees- orally or in writing- to a payment period extending beyond thirty days, it forfeits trust protection." Id. at 47.
The case was decided on March 11, 2004; this summary was posted Mar. 21, 2005.