PACA in Bankruptcy

A recent decision under the Perishable Agricultural Commodities Act has increased the scope of the federal government's power. In re. Perfectly Fresh Farms, Inc. and Jaime O. Rovelo, et al., has set a new precedent in PACA cases by using related companies' admissions and pleadings in a Bankruptcy Court against one another. Statements and documents must be provided to a bankruptcy court as part of the bankruptcy process and these materials are provided under penalty of perjury. It is already a precedent that a company that is in bankruptcy can have these records and filings used against them by government officials bringing the PACA claim. This case advances that precedent.

Four business entities were created to deal in fresh produce: Perfectly Fresh Marketing, Inc., Perfectly Fresh Farms, Inc., Perfectly Fresh Specialty, Inc., and Perfectly Fresh Consolidation, Inc. Perfectly Fresh Marketing, Inc. remained in business while the other three entities filed for bankruptcy and moved to consolidate the cases for the sake of convenience. The defendants claimed in the PACA hearing that the produce debts were owed by Perfectly Fresh Marketing (which was the only entity not in bankruptcy) and that the admissions made by the other 3 business entities could not be used against them. The judge ruled that because of the strong connection between the four entities (they were all owned by a mix of the same four or five people) it was appropriate to use the admissions that the other business entities had made under oath at the bankruptcy hearing in the PACA hearing.

Posted: 6/17/2009