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Fresh Direct Inc. v. Harvin Foods Inc.

United States District Court, D. Delaware

March 30, 2017

FRESH DIRECT, INC., et al., Plaintiffs,
v.
HARVIN FOODS, INC., et al., Defendants.

          MEMORANDUM

         I. INTRODUCTION

         On January 15, 2010, Fresh Direct, Inc. ("Fresh Direct") filed suit against Harvin Foods, Inc. and its principal officer, Grady Keith Harvin, (collectively, "Harvin Foods"). In its initial complaint, Fresh Direct sought a temporary restraining order ("TRO") and preliminary injunction to freeze Harvin Foods' assets, based on that company's, alleged violation of Section 5(c) of the Perishable Agricultural Commodities Act (the "PACA"), 7 U.S.C. §499e(c). Specifically, Fresh Direct alleged that Harvin Foods failed to compensate it for produce received and accepted by Harvin Foods and, in so doing, violated the statutory trust ensured by PACA. (D.I. 1 at 3.)

         On February 1, 2010, Fresh Direct filed an amended Complaint, adding Whitmore Distributing Co. ("Whitmore"), Philadelphia Produce Credit Bureau ("PPCB"), and Champion Produce Sales Inc. ("Champion") as Plaintiffs. (D.I. 15). Plaintiffs filed an amended motion for preliminary injunction. (D.I. 16). The court granted Plaintiffs motion in part by freezing Harvin Foods' assets in the amount allegedly owed to Plaintiffs-$170, 720.57. (D.I. 53). On December 8, 2010, Foodsource filed a motion to consolidate its case, Case No. 1:10-cv-00439-GMS, with the present action. (D.I. 66). The court granted Foodsource's motion on April 5, 2011. (D.I. 75). After riling another amended Complaint, Plaintiffs again filed an amended motion for preliminary injunction. (D.I. 70). On March 30, 2012, the court granted Plaintiffs' amended motion for preliminary injunction, ordering that "all funds belonging or owing to Harvin Foods, Inc. ... up to and including $294, 543.62, shall be immediately paid to Kate Ellis, Esq., McCarron & Diess, attorneys for Plaintiffs, to be held for the benefit of Plaintiffs pending further court order." (D.I. 102).

         A third amended Complaint was filed, adding Wilmington Savings Fund Society, FSB ("WSFS") as defendant. (D.I. 111). Plaintiffs and Defendant WSFS came to an agreement on November 13, 2013, whereby WSFS agreed to settle Plaintiffs' claims against WSFS for a total payment of $300, 301.47. (D. I. 164 at 1). Pursuant to the stipulation Plaintiffs and WSFS filed, WSFS was dismissed from the case. (D.I. 147). On December 29, 2014, the court granted in-part and denied in-part Plaintiffs' Motion for Default Judgment and for Disbursement of Trust Funds. (D.I. 161). Plaintiffs' request for default judgment was denied as to Mr. Harvin, but granted as to Harvin Foods, Harvin Partners, Harvin Properties, and KH Foods. Id. The court ordered that "Defendants owed Plaintiffs the aggregate sum of $214, 146.64 as a trust debt under Section 5(c) of the Perishable Agricultural Commodities Act, 7 U.S.C. § 499e(c)(2)." (D.I. 162 at 1). Presently before this court is Plaintiffs' motion for summary judgment against the sole remaining Defendant, Grady Keith Harvin ("Mr. Harvin"), filed on April 29, 2016. (D.I. 163). For the reasons that follow, the court will grant Plaintiffs' motion.

         II. BACKGROUND

         The plaintiffs are produce dealers licensed under PACA. (D.I. 17 at 4). Harvin Foods is a licensed produce wholesale dealer and broker under PACA. (D.I. 9, Ex. 1). Mr. Harvin is the President, (D.I. 21 ¶ 2), and sole owner of Harvin Foods. (D.I. 153 ¶ 5(e)). He was also the only principal reported on Harvin Foods' PACA license. (D.I. 9, Ex. 1). The produce that Harvin Foods receives is stored in Harvin Foods' warehouse before it is sold and delivered to restaurants and other customers of Harvin Foods. (D.I. 20 at 5-6). The plaintiffs claim that they collectively delivered $246, 901.47 worth of produce to Harvin Foods, and Harvin Foods accepted those deliveries. (D.I. Ill. ¶ 7). Harvin Foods, however, failed to pay the amount it owed to for the produce. Id. The produce delivered is subject to the PACA and the plaintiffs note that they preserved their rights in the statutory trust as required under PACA, 7 U.S.C. §499(e)(c), and the relevant accompanying regulations.[1] (D.I. Ill. ¶¶ 8-9). The plaintiffs allege that Harvin Foods has refused to pay them, because of an internal dispute with former Harvin Foods' employees. (D.I. 17 at 3-4; D.I. 20 at 2-4).

         Harvin Foods does not contest that its refusal to pay the plaintiffs results from a dispute with former employees. (D.I. 20 at 6-7). Specifically, Harvin Foods states that the produce purchased from the plaintiffs was ordered by two individuals, Raymond Maragni, Jr. ("Maragni") and Vincenzo Giuffrida ("Giuffrida"), with whom Harvin Foods briefly entered into a food brokerage business. Id. at 6. Harvin Foods notes that in or around July 2009, it agreed to enter into a limited affiliation brokerage business with Maragni and Giuffrida, wherein the brokerage business would buy product from vendors that would then be transported by a trucking company from the vendor to the customer. Id. at 2. Harvin Foods indicates that the brokerage business initially went well, and Maragni and Giuffrida worked from Harvin Foods' office. Id. Maragni and Giuffrida later stopped working from the Harvin Foods' office, however, and became unresponsive when business began to "pick up." Id. Soon after, Harvin Foods began receiving complaints from the brokerage business vendors that had not been paid for produce they shipped to Harvin Foods. Id. Harvin Foods notes that it had not done business with many of these vendors in the past. Id. Upon investigating the complaints, Harvin Foods learned that Maragni and Giuffrida were fraudulently ordering produce from growers and/or vendors on Harvin Foods' credit, but having brokerage business customers send their payment checks directly to them. Id. Harvin Foods then terminated its affiliation with Maragni and Giuffrida and filed a criminal complaint with the Wilmington Police Department to alert them of the fraudulent scheme. Id. at 3.

         On May 14, 1999, Harvin Foods granted WSFS, a security interest in all of its accounts, inventory, equipment, specific property, records, securities, and proceeds. (D.I. 164, Ex. A). On November 13, 2013, ?laintiffs and WSFS came to an agreement to settle Plaintiffs' claims against WSFS for a total payment of $300, 301.47. (D. I. 164 at 1). The settlement with WSFS allowed Plaintiffs to recoup the amount owed to them for their produce. Id. at 14. Plaintiffs seek to recover only interest and attorneys' fees from Mr. Harvin personally.

III. STAND ARE OF REVIEW

         Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A fact is material if it "could affect the outcome" of the proceeding. Lamont v. New Jersey, 637 F.3d 177, 181 (3d Cir. 2011). A genuine dispute exists "if the evidence is sufficient to permit a reasonable jury to return a verdict for the non-moving party." Id. The moving party bears the burden of proving that summary judgment should be granted. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585 n.10 (1986). The district court must view the evidence in the light most favorabl e to the nonmoving party and draw inferences in that party's favor. Wishkin v. Potter, 476 F.3d 180, 184 (3d Or. 2007).

         The mere existence of some evidence in support of the nonmoving party will not be sufficient for denial of a summary judgment motion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). Rather, the nonmoving party must present enough evidence to enable a jury to reasonably find for it on that issue. Id. The party opposing, summary judgment must present more than just "mere allegations, general denials, or . . . vague statements" to show the existence of a genuine issue. Quiroga v. Hasbro, Inc., 934 F.2d 497, 500 (3d Cir. 1991). The moving party is entitled to judgment as a matter of law if the nonmoving party fails to make a sufficient showing on an essential element of its case for which it has the burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 322(1986).

         IV. DISCUSSION

         The court has jurisdiction under 28 U.S.C. § 1331. This matter arises under the trust provision of the Perishable Agricultural Commodities Act. • 7 U.S.C § 499e(c)(2). That provision requires:

[p]erishable agricultural commodities received by a commission merchant, dealer, or broker in all transactions, and all inventories of food or other products derived from perishable agricultural commodities, and any receivables or proceeds from the sale of such commodities of products, shall be held by such commission merchant, dealer, or broker in trust for the benefit of all unpaid suppliers or sellers of such commodities or agents involved in the transaction, until full payment ...

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