Summary of a Recent
Judicial
Development in
PACA
Court Judgment Does Not Extinguish Duty
to Pay PACA Trust Funds
Craig RaysorNational AgLaw Center Research Associate
In Post & Taback, Inc. v. United States Dep't of Agric., 123 Fed. App'x 406 (D.C. Cir. 2005), the Court of Appeals for the D.C. Circuit denied a petition for review, holding that a merged judgment that paid out creditors was not considered full prompt payment under the Perishable Agricultural Commodities Act (PACA), and a merchant was responsible for misconduct by its employee.
Background
Post & Taback failed to pay suppliers promptly, and thus numerous suppliers filed claims. Id. at 407. Post & Taback paid out these numerous suppliers through a judgment prior to the United States Department of Agriculture (USDA) complaint hearing date on PACA claims. Id. at 407. In addition, an employee of Post & Taback bribed a USDA inspector. Id. at 408. The Secretary of Agriculture claimed that Post & Taback "engaged in willful, flagrant, and repeated violations" of § 2(4) of PACA by failing to make full prompt payment to sellers and bribing an USDA inspector. Id. at 407. The issues before the Court were whether a judgment could be considered a full prompt payment under PACA, and whether a merchant is liable for an employee who bribes an agent without the consent of the merchant. See Id.
Analysis and Holding
The court held that a judgment that offered only "cents on the dollar for [suppliers'] claims in exchange for waiving any further proceedings against [Post & Taback]" did not satisfy the requirement of "full payment promptly" under 7 U.S.C. § 499b(4). Id. The court said that the Secretary was not party or privy to that civil action, and therefore not barred by the doctrine of res judicata in bringing such an administrative action regarding willful violations of the PACA. See id. at 408.
Additionally, the court held that the plain language of the statute provided no escape for liability for a merchant when an employee engaged in misconduct within the scope of his employment. Id. The court also held that state law definition of "within the scope of employment" does not apply, but rather the common law concept of agency applies, and the provision Post & Taback advanced was not proper because this case was an administrative hearing rather than a criminal prosecution. Id.
The case was decided on February 11, 2005.