This Week At The Ninth: Unpaid Sellers And Waived Trial Rights

• Published date: 18 July 2022
• Subject Matter: Litigation, Mediation & Arbitration, Real Estate and Construction, Trials & Appeals & Compensation, Landlord & Tenant - Leases
• Law Firm: Morrison & Foerster LLP
• Author: Ms Lena H. Hughes and Adam L. Sorensen

This week, the Ninth Circuit determines whether an online produce wholesaler can file suit under the Perishable Agricultural Commodities Act, and answers a novel question about whether a party that contractually waived its jury trial rights can object to an opponent's withdrawal of a jury demand.

PRODUCE PAY v. IZGUERRA PRODUCE

The Court holds that the district court erred in dismissing an online platform company's claims under the Perishable Agricultural Commodities Act ("PACA") for failure to state a claim because the company had plausibly alleged that it was an unpaid supplier or seller of produce.

Panel: Judges Kelly, Jr. (CA10), M. Smith, Jr., and Forrest, with Judge Kelly writing the opinion, and Judge M. Smith dissenting.

Key Highlight: "[N]othing in PACA or [S&H Packsing & Sales Co. v.] Tanimura [Distributing, Inc., 883 F.3d 797, 813 (9th Cir. 2018) (en banc)] prevents a business from buying produce from a grower outright, and then supplying that produce to a distributor in a way such that the business receives PACA priority."

Background: In April 2019, Izguerra Produce, a produce dealer, purchased 1,600 25-pound cartons of avocados from Produce Pay, a company that buys and sells wholesale produce internationally through an online platform where growers can post their produce for sale. After Izguerra failed to pay Produce Pay the full amount owed for the avocados, Produce Pay sued Izguerra under PACA. Under PACA, sellers and suppliers of produce receive certain special protections against non-payment. The district court dismissed Produce Pay's PACA claims for failure to state a claim, concluding that Produce Pay was not a supplier or seller of produce because it had limited its risk in the event that Izguerra failed to sell any of the marketable produce in a number of respects.

Result: The Ninth Circuit reversed and remanded. To state a PACA claim, the court explained, a plaintiff must allege (1) the commodities sold were perishable agricultural commodities, (2) the purchaser was a commission merchant, dealer, or broker, (4) the transaction occurred in contemplation of interstate or foreign commerce, (4) the seller has not received full payment on the transaction, and (5) the seller preserved its trust rights by including statutory language referring the trust on its invoices. These elements were satisfied, the court held, because the avocados were perishable, Izguerra is a dealer of avocadoes, the transactions occurred in contemplation of...