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Classic Harvest LLC v. Freshworks LLC

United States District Court, N.D. Georgia, Atlanta Division

November 7, 2017

CLASSIC HARVEST LLC, Plaintiff,
v.
FRESHWORKS LLC, et al., Defendants. AGRIFACT CAPITAL, LLC, Third Party Plaintiff,
v.
BLACKHIVE CORP., INC., Third Party Defendant. AGRIFACT CAPITAL, LLC, Cross-Claimant,
v.
US FOODS, INC., Cross-Defendant.

          OPINION AND ORDER

          WILLIAM S. DUTFEY, JR. UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on AgriFact Capital, LLC's (“AgriFact”) Crossclaim against U.S. Foods, Inc. [442] (“Crossclaim”), and U.S. Foods, Inc.'s (“US Foods”) Motion to Stay Crossclaim [453], Motion to Dismiss [455], Motion for More Definite Statement [456], and Motion to Stay Discovery in the Crisp Holdings v. U.S. Foods Action [452].

         Also before the Court is AgriFact's Motion for Leave to File Third-Party Complaint Against Blackhive Corp., Inc. [443] (“Motion for Leave”).[1]

         I. BACKGROUND

         This is an action under the Perishable Agricultural Commodities Act (“PACA”), 7 U.S.C. §§ 499a, et seq. When perishable agricultural commodities (“Produce”) are sold, PACA imposes a nonsegregated, “floating” trust, in favor of Produce sellers, on the Produce sold, products derived from the Produce, “and any receivables or proceeds from the sale of such” Produce or product derived from it. 7 U.S.C. § 499e(c)(2). PACA requires the buyer to hold the trust assets “in trust for the benefit of all unpaid suppliers or sellers of such [Produce], ” “until full payment of the sums owing in connection with such transactions has been received by such unpaid suppliers . . . .” Id. A trust beneficiary may bring an action in federal court “to enforce payment from the trust.” 7 U.S.C. § 499e(c)(5).

         Crisp bought Produce on credit from wholesale Produce suppliers, including Classic Harvest, LLC (“Classic Harvest”). Crisp then resold the Produce to its customers, including U.S. Foods, on credit, generating accounts receivable (“Receivables”). Under PACA, Crisp was required to hold, in trust (the “PACA Trust”), the Produce, products derived from the Produce, and the Receivables or proceeds from the sale of the Produce (the “Trust Assets”), for the benefit of Crisp's unpaid Produce suppliers, including Classic Harvest.

         To collect the amounts owed to it, on August 25, 2015, Classic Harvest filed its Complaint [1] asserting claims against Crisp and its principals for breach of their duties under PACA and to enforce the PACA Trust, including to recover Trust Assets held by AgriFact. Classic Harvest also asserted a claim against AgriFact for conversion and unlawful retention of Trust Assets On September 4, 2015, the Court entered the “Consent Injunction and Agreed Order Establishing PACA Claims Procedure” [24] (the “September 4th Order”). The September 4th Order provides for the Court to exercise exclusive in rem jurisdiction over Crisp's PACA Trust Assets and directs counsel for Crisp to preserve and collect Crisp's PACA Trust Assets, including any unpaid Receivables. The September 4th Order further establishes a framework for Crisp's other unpaid PACA creditors to submit their claims against Crisp in this action and share, on a pro rata basis, in the recovery of Crisp's PACA Trust Assets.

         On December 3, 2015, Classic Harvest filed its Amended Complaint, adding claims against AgriFact for aiding and abetting Crisp's principals' breach of fiduciary duty, unjust enrichment and replevin, and a claim against all Defendants for attorneys' fees and costs.

         On January 14, 2016, AgriFact filed its Answer [118] to Classic Harvest's Amended Complaint.

         On August 16, 2016, Crisp filed its Third Party Complaint [336] against U.S. Foods asserting claims for Enforcement of the PACA Trust (Count I), Failure to Pay Promptly (Count II), and Breach of Contract (Count III), based on U.S. Foods' alleged failure to pay in full certain invoices.[2] Crisp also asserted claims for Declaratory Judgment (Count IV), Breach of the PACA Trust (Count V), Breach of Duty as PACA Trustee (Count VI), and Conversion and Unlawful Retention of PACA Trust Assets (Count VII), based on U.S. Foods' deduction, from amounts it owed to Crisp, of $1, 077, 516.95 in product promotional allowances.

         On October 14, 2016, U.S. Foods moved to dismiss Counts IV-VII of Crisp's Third Party Complaint for failure to state a claim for relief. ([383]).[3]

         On April 28, 2017, the Court dismissed Count VI of Crisp's Third Party Complaint for failure to state a claim for relief. ([431]). The Court denied U.S. Foods' Motion to Dismiss Counts IV, V and VII. (Id.).

         On May 12, 2017, U.S. Foods filed its Answer [433] to Crisp's Third Party Complaint.

         On May 31, 2017, the Court evaluated the claims filed by the PACA Creditors in this case and approved claims in the total amount of $1, 860, 344.02. (See May 31, 2017, Order [436]; Updated PACA Trust Chart [439.1]).[4]

         On June 16, 2017, AgriFact filed its Crossclaim [442] against U.S. Foods. In it, AgriFact asserts claims for Enforcement of the PACA Trust (Count I), Failure to Pay Promptly (Count II), and Breach of Contract (Count III), based on U.S. Foods' alleged failure to pay in full certain invoices for Produce that Crisp sold to U.S. Foods, and which invoices Crisp factored to AgriFact.[5] AgriFact asserts claims for subrogation (Counts VIII and IX), including based on the Factoring Agreement in which Crisp granted AgriFact the authority to exercise any right or remedy available to Crisp. AgriFact also asserts claims for contribution (Counts IV-VII), based on U.S. Foods' deduction, from amounts it owed to Crisp, of $1, 077, 516.95 in product promotional allowances.[6] AgriFact asserts that the product promotional allowances are Crisp PACA Trust Assets, and therefore, if AgriFact ...


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