February 15, 2017
Authored by: Brandon Neuschafer
The Perishable Agricultural Commodities Act regulates transactions in fresh and frozen fruits and vegetables. It does this in part by creating a general trust for the benefit of produce sellers. In this post written for Bryan Cave’s Bankruptcy and Restructuring Blog, Atlanta Associate Leah Fiorenza McNeill tackles some of the bankruptcy implications of the PACA trust presented by the recent Fifth Circuit opinion in Kingdom Fresh Produce, Inc. v. Stokes Law Office (In re Delta Produce), which found that “the trust structure of PACA mandates that produce sellers be paid in full even prior to the costs of counsel which collected every single dollar needed to pay those very produce sellers’ claims.” Leah concludes:
Kingdom Fresh can be viewed as a victory for produce sellers and other beneficiaries of PACA – once again, such creditors are declared to be first among all other creditors. But its slavish devotion to PACA renders every insolvency case involving the sale of produce much harder – things will grind to a halt until professionals employed to collect and liquidate assets negotiate with PACA creditors to be paid. By depriving courts of the power to surcharge PACA trust assets, collection of those assets will be delayed or just won’t happen at all. No one benefits, not even those which PACA is supposed to help. Kingdom Fresh is, in fact, one of the most anti-PACA cases we at The Bankruptcy Cave have seen, despite its protestations to the contrary.