859 F. Supp. 2d 923
N.D. Ill.2012Background
- PACA creates a trust for sellers of perishable commodities; plaintiffs allege S & M Produce breached the trust by not paying for supplied produce.
- Judgment against S & M Produce entered November 9, 2010 for the listed PACA trust amounts to each PSJ plaintiff and World Wide Produce, Inc.
- Donald J. Mided is the president and held 53% of S & M stock; Lance Mided (47%) was his co-owner; Don admits nominal ownership and limited day-to-day control after 1998.
- Don allegedly remained on the PACA license and occasionally deposited proceeds, but there is no evidence he participated in daily management or decision-making after 1998.
- PSJ Plaintiffs moved for summary judgment; Mided moved for summary judgment against World Wide and Pearson and cross-moved against PSJ; responses were not timely filed.
- Court denies PSJ’s motion for summary judgment and grants in part and denies in part Mided’s motion; Pearson is moot; PSJ and World Wide claims against Don Mided are dismissed, final judgment to be entered.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Mided is personally liable under PACA for S&M's trust breach | Mided, as president and controlling shareholder, had power to control trust assets. | Mided lacked day-to-day control; he relinquished operational control in 1998 and did not manage trust assets. | No personal liability; insufficient control over trust assets. |
| Appropriate test for individual PACA liability in closely held corporations | Formal title and ownership imply control over trust assets. | Context and actual management matter; control must be actual, not nominal. | Contextual analysis governs; formal title alone is insufficient. |
| Whether the PSJ Plaintiffs are entitled to summary judgment against Mided | Mided breached fiduciary duties and caused trust shortfall. | Mided had no control and no fiduciary breach regarding PACA assets. | Denied for PSJ; granted in part as to other parties; claims against Mided dismissed. |
| Mootness of Pearson Food Corporation’s claims | Pearson alleged claims against S&M; could be affected by Mided liability. | Pearson did not claim against Mided personally; moot if no direct claim. | Motion as to Pearson denied as moot. |
Key Cases Cited
- Bear Mountain Orchards, Inc. v. Mich-Kim, Inc., 623 F.3d 163 (3d Cir. 2010) ( Liability depends on ability to control PACA assets, not mere formal titles)
- Golman-Hayden v. Fresh Source Produce, Inc., 217 F.3d 348 (5th Cir. 2000) (Officers with controlling interest may be liable if they breach fiduciary duties)
- Sunkist Growers, Inc. v. Fisher, 104 F.3d 280 (9th Cir. 1997) (Assessing individual liability by looking at involvement in management)
- Coosemans Specialties, Inc. v. Gargiulo, 485 F.3d 701 (2d Cir. 2007) (Tests for individual liability involve position and actual control over trust assets)
- West Indian Sea Island Cotton Ass’n v. Threadtex, Inc., 761 F. Supp. 1041 (S.D.N.Y. 1991) (Officer who causes breach of trust may be personally liable; formal role not determinative)