1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 JEM D INTERNATIONAL Case No.: 22CV383-GPC(JLB) (MICHIGAN), INC., 12 ORDER GRANTING PLAINTIFF’S Plaintiff, 13 UNOPPOSED MOTION FOR v. PRELIMINARY INJUNCTION 14 JJD PRODUCE, LLC, JB RESOURCES, 15 [Dkt. No. 32.] LLC, JOEL BURNS, JORGE 16 ALEJANDRO BELTRAN RITZ AND DIEGO BELTRAN, 17 Defendant. 18 19 Before the Court is an order to show cause why a preliminary injunction should not 20 issue after a temporary restraining order was issued on April 5, 2022. (Dkt. No. 31.) No 21 opposition was filed by Defendants. A Zoom hearing was held on April 19, 2022. (Dkt. 22 No. 43.) Ray Mason, Plaintiff’s representative, Elizabeth Ellis, Esq. and Michael J. 23 Kolesin, Esq. appeared on behalf of Plaintiff and Defendants Joel Burns, Jorge Ritz and 24 Diego Beltran appeared pro se. (Id.) 25 Background 26 On March 22, 2022, Plaintiff Jem D International (Michigan) Inc. (“Plaintiff” or 27 “Jem D”) filed a complaint against Defendants JJP Produce LLC (“JJP Produce”), JB 28 1 Resources LLC (“JB Resources”), Joel Burns (“Burns”), Jorge Alejandro Beltran Ritz 2 (“Ritz”), and Diego Beltran (“Beltran”) (collectively “Defendants”) for failing to 3 maintain statutory trust, failure to make prompt payments of trust funds, unlawful 4 dissipation of trust assets, breach of contract and failure to pay goods sold. (Dkt. No. 1, 5 Compl.) The action is brought under the trust provisions of Section 5(c) of the Perishable 6 Agricultural Commodities Act, (“PACA”), 7 U.S.C. § 499e(c). (Id. ¶ 10.) 7 Jem D is a Canadian corporation registered to do business in Michigan and Texas 8 and is in the business of buying and selling wholesale quantities of perishable agricultural 9 commodities. (Dkt. No. 13-2, Mason Decl. ¶ 4.) It is a produce dealer subject to and 10 licensed under PACA. (Id.; id., Ex. 1.) Defendant JJD Produce is a Nevada limited 11 liability company registered to do business in California with its principal place of 12 business in La Jolla, CA and also in the business of buying and selling wholesale 13 quantities of produce and is a produce dealer subject to and licensed under PACA. (Id. ¶ 14 5; id., Ex. 2.) 15 Between September 30, 2021 and October 28, 2021, Plaintiff sold and delivered to 16 Defendants wholesale quantities of produce worth $65,800.00 that were shipped from 17 Plaintiff’s facility in Pharr, Texas to Defendants’ facility in La Jolla, CA. (Id. ¶ 6; id., 18 Ex. 4.) Defendants accepted the produce but have failed to make payment despite 19 repeated demands. (Id.) Plaintiff timely preserved its interest in the PACA trust in the 20 unpaid principal amount of $65,800.00 by issuing invoices with the required statutory 21 language under 7 U.S.C. § 499e(c)(4). (Id. ¶ 8; id., Ex. 4.) 22 Since January 2022, Plaintiff has repeatedly demanded payment of the outstanding 23 balance and Defendants have repeatedly promised to pay the balance but have not. (Id. ¶ 24 10.) In one email dated January 28, 2022, Defendant Burns apologized for the delay and 25 inconvenience and explained that they have been “aggressively trying to collect on 26 payment for these invoices without success . . . and [w]e will be paying you as soon as 27 possible and keep you posted on the exact timing.” (Id.; id., Ex. 5.) Then, on March 8, 28 2022, Defendant Ritz promised that he intended to make a “partial payment” of the 1 balance due but no payment was received. (Id. ¶ 11; id., Ex. 6.) On March 14, 2022, 2 Ritz emailed again stating that a wire payment would be made but no payment was ever 3 made. (Id.) Defendants’ refusal and inability to pay demonstrate that they are failing to 4 maintain sufficient assets in the statutory trust and have dissipated and will continue to 5 dissipate trust assets belonging to Jem D. (Id. ¶ 12.) 6 On April 5, 2022, the Court granted Plaintiff’s amended motion for temporary 7 restraining order and order to show cause why a preliminary injunction should not issue. 8 (Dkt. No. 31.) No opposition was filed. At the hearing, Defendant Jorge Ritz indicated 9 that he has been pre-approved for a loan and the funds should be available soon in order 10 to pay the amounts due. 11 Discussion 12 On a motion for preliminary injunction, the moving party must show: (1) a 13 likelihood of success on the merits; (2) a likelihood of irreparable harm to the moving 14 party in the absence of preliminary relief; (3) that the balance of equities tips in the 15 moving party’s favor; and (4) that an injunction is in the public interest. Winter v. 16 Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). Injunctive relief is “an 17 extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is 18 entitled to such relief,” Winter, 555 U.S. at 22, and the moving party bears the burden of 19 meeting all four Winter prongs. See DISH Network Corp. v. FCC, 653 F.3d 771, 776-77 20 (9th Cir. 2011). 21 A. Likelihood of Success on the Merits1 22 Plaintiff argues that it has demonstrated a likelihood of success on the merits under 23 the provisions of PACA. (Dkt. No. 13-1 at 6-7.) Defendant Burns does not dispute that 24 PACA applies and the amounts sought and indicates his intent to pay the amounts due. 25 26 27 1 The Court relies on its analysis on the temporary restraining order since there have been no additional 28 1 (Dkt. No. 28.) At the hearing, Defendants Ritz and Beltran did not challenge the amounts 2 sought under PACA. 3 “Congress enacted PACA in 1930 to prevent unfair business practices and promote 4 financial responsibility in the fresh fruit and produce industry.” S & H Packing & Sales 5 Co., Inc. v. Tanimura Distrib., Inc., 883 F.3d 797, 802 (9th Cir. 2018) (citation omitted). 6 “In 1984, PACA was amended to address the uncertain financial arrangements created by 7 dealers receiving goods without payment. A statutory trust was provided by Congress 8 under PACA on behalf of suppliers and sellers that were unpaid.” Grimmway Enters., 9 Inc. v. PIC Fresh Global, 548 F. Supp. 2d 840, 846 (E.D. Cal. 2008). 10 PACA provides for the establishment of a statutory trust “in which a produce 11 dealer holds produce-related assets as a fiduciary until full payment is made to the 12 produce seller or producer.” Bowlin & Son, Inc. v. San Joaquin Food Serv., 958 F.2d 13 938, 939 (9th Cir. 1992). “The trust automatically arises in favor of a produce seller 14 upon delivery of produce and is for the benefit of all unpaid suppliers or sellers involved 15 in the transaction until full payment of the sums owing has been received.” C & E 16 Enters., Inc. v. Milton Poulos, Inc., 947 F.2d 1351, 1352 (9th Cir. 1991); 7 U.S.C. § 17 499e(c)(2); 7 U.S.C. § 46.46(c). “Dealers violate PACA if they do not pay promptly and 18 in full for any perishable commodity in interstate commerce.” Grimmway Enters., Inc.,, 19 548 F. Supp. 2d at 846 (citing 7 U.S.C. § 499b(4)). 20 The PACA Trust is a nonsegregated “floating” trust comprised of (a) “perishable 21 agricultural commodities received in all transactions,” (b) “all inventories of food and 22 other products derived from such perishable agricultural commodities,” and (c) “all 23 receivables or proceeds from the sale of such commodities and food or products derived 24 therefrom.” 7 C.F.R. § 46.46(b); 7 U.S.C. § 499e(c)(2). PACA provides the district 25 courts with jurisdiction “specifically to entertain (i) actions by trust beneficiaries to 26 enforce payment from the trust, and (ii) actions by the Secretary to prevent and restrain 27 dissipation of the trust.” 7 U.S.C. § 499e(5). 28 1 Here, Plaintiff is subject to a PACA trust as a licensed produce “dealer” of 2 agricultural commodities and has preserved its ability to enforce the benefits of PACA by 3 providing the required statutory language on its invoices. (Dkt. No. 13-2, Mason Decl. ¶¶ 4 4, 8); 7 U.S.C. § 499e(c)(3). Defendants are also “dealers” subject to and licensed under 5 PACA. (Dkt. No. 13-2, Mason Decl. ¶ 5); 7 U.S.C. §§ 499a(b)(6).2 Between September 6 30, 2021 and October 28, 2021, Plaintiff sold and delivered to Defendants produce in the 7 amount of $65,800.00. (Dkt. No. 13-2, Mason Decl. ¶ 6.) When Plaintiff delivered the 8 produce to Defendants, it became a beneficiary in a statutory trust designed to assure 9 payment. 7 U.S.C. § 499e(c)(2). Despite repeated demands, Defendants have not paid 10 the amounts due. (Dkt. No. 13-2, Mason Decl. ¶ 6.) Therefore, Plaintiff has 11 demonstrated a likelihood of success on the merits for Defendants’ failure to comply with 12 the trust provisions of PACA. 13 B. Likelihood of Irreparable Harm 14 Plaintiff maintains that it will be irreparably harmed because Defendants have 15 already indicated that they do not have sufficient funds to pay Plaintiff because they are 16 having issues collecting their receivables and this threat of dissipation of trust assets 17 supports irreparable harm. (Dkt. No. 13-1 at 8.) Defendants do not challenge this factor. 18 Congress recognized there is irreparable harm if PACA trust assets are dissipated 19 because it is nearly impossible for a beneficiary to obtain recovery once there has been 20 21 22 2 “(6) The term ‘dealer’ means any person engaged in the business of buying or selling in wholesale or jobbing quantities, as defined by the Secretary, any perishable agricultural commodity in interstate or 23 foreign commerce, except that (A) no producer shall be considered as a ‘dealer’ in respect to sales of any such commodity of his own raising; (B) no person buying any such commodity solely for sale at 24 retail shall be considered as a ‘dealer’ until the invoice cost of his purchases of perishable agricultural 25 commodities in any calendar year are in excess of $230,000; and (C) no person buying any commodity other than potatoes for canning and/or processing within the State where grown shall be considered a 26 ‘dealer’ whether or not the canned or processed product is to be shipped in interstate or foreign commerce, unless such product is frozen or packed in ice, or consists of cherries in brine, within the 27 meaning of paragraph (4) of this section. Any person not considered as a ‘dealer’ under clauses (A), (B), and (C) may elect to secure a license under the provisions of section 499c of this title, and in such case 28 1 dissipation from the trust. H.R. Rep. No. 98–543 (1983); Tanimura & Antle, Inc. v. 2 Packed Fresh Produce, Inc., 222 F.3d 132, 139-140 (3d Cir. 2000) (“We also find that 3 PACA trust dissipation in this case constitutes irreparable harm” because “once the 4 PACA trust is dissipated, it is almost impossible for a beneficiary to obtain recovery.”); 5 Rey Rey Produce SFO, Inc. v. Mis Amigos Meat Market, Inc., No C 08–1518 VRW, 2008 6 WL 1885738, at *2 (N.D. Cal. Apr. 24, 2008) (finding evidence of prior bounced checks 7 and unfulfilled promises to pay established irreparable injury element for a TRO under 8 PACA). “A showing of threatened trust dissipation amounts to a showing of a possibility 9 of irreparable injury.” Rey Rey Produce SFO, Inc., 2008 WL 1885738, at *2. 10 As such, district courts have routinely held that dissipation of PACA trust assets 11 constitutes irreparable harm. See CP Produce, LLC v. Quality Fresh Farms, Inc., No. 12 1:18–cv–00077–DAD–EPG, 2018 WL 1980749, at *3 (E.D. Cal. Jan. 19, 2018) 13 (“District courts in the Ninth Circuit have regularly found TROs warranted in the PACA 14 context, and routinely conclude that the prospect of statutory trust assets being depleted 15 constitutes irreparable injury.”); Inn Foods Inc. v. Turner Mead LLC, No. C 07–00649, 16 2007 WL 484781 (N.D. Cal. Feb. 9, 2007) (“[I]t appears Plaintiff will suffer immediate 17 and irreparable injury due to said Defendant's dissipation of Plaintiff's interest in the 18 statutory trust created pursuant to 7 U.S.C. § 499e(c) and that such dissipation will 19 continue in the absence of injunctive relief.”). 20 Here, because Defendants lacked any funds to make even partial payments to 21 Plaintiff suggests that the trust assets have been or are being dissipated. Accordingly, 22 Plaintiff has demonstrated irreparable harm to support injunctive relief. 23 C. Balance of Equities 24 Plaintiff maintains that the balance of equities weighs in its favor because it is 25 merely asking the status quo be maintained by requiring Defendants to satisfy their 26 fiduciary duties as trustees of the PACA trust. (Dkt. No. 13-1 at 8-9.) Defendants do not 27 oppose this factor. 28 1 Plaintiff is statutorily entitled to a trust in the proceeds of any sales from the 2 products it shipped until the outstanding invoices are paid in full. 7 U.S.C. § 499e(c)(2). 3 Defendant Burns has not demonstrated any hardship he will suffer by being forced to not 4 dissipate trust assets. Accordingly, the balance of equities weighs in favor of Plaintiff. 5 D. Public Interest 6 Plaintiff argues that injunctive relief is in the public interest because PACA was 7 enacted to protect the public interest which Defendants do not challenge. (Dkt. No. 13-1 8 at 9; Dkt. No. 28.) 9 Congress specifically enacted PACA recognizing that the “burden on commerce in 10 perishable agricultural commodities” is “contrary to the public interest.” 7 U.S.C. § 11 499e(c)(1); Tanimura & Antle, Inc., 222 F.3d at 135 (“In particular, Congress intended to 12 protect small farmers and growers who were especially vulnerable to the practices of 13 financially irresponsible commission merchants, dealers, and brokers.”). Therefore, 14 granting a preliminary injunction would serve the public interest. 15 E. Bond 16 Plaintiff asks that no bond be imposed because Defendants already have 17 $65,800.00 worth of trust assets of Plaintiff as security for the imposition of injunctive 18 relief. (Dkt. No. 13-2 at 9.) 19 Federal Rule of Civil Procedure 65 provides that a court may only issue a 20 preliminary injunction “if the movant gives security in an amount that the court considers 21 proper to pay the costs and damages sustained by any party found to have been 22 wrongfully enjoined or restrained.” Fed. R. Civ. P. 65(c). Because Defendants have not 23 disputed the $65,800.00 due and owed, and they have made no showing of any hardship, 24 the Court concludes no bond or security is required of Plaintiff. 25 Conclusion 26 Based on the reasoning above, the Court GRANTS Plaintiff’s motion for a 27 preliminary injunction. Accordingly, IT IS HEREBY 28 1 ORDERED, that upon service of this Order, Defendants, their customers, agents, 2 employees, officers, directors, subsidiaries, related entities, successors, assigns, banking 3 institutions, and money transfer services, shall not alienate, dissipate, pay over or assign 4 any assets of JJD Produce, or its subsidiaries, parent, or related companies, including but 5 not limited to JB Resources, until further order of this Court or until Defendants deliver 6 to Plaintiff’s counsel for the benefit of Plaintiff the sum of $65,800.00 by bank check or 7 wire transfer; and it is further 8 ORDERED, that within five business days of the date of this Order, Defendants 9 shall supply to Plaintiff’s counsel the following documents regarding the assets of JJD 10 Produce and its related, parent and subsidiary companies, including but not limited to JB 11 Resources: (1) most recent balance sheets and profit/loss statements; (2) all accounts 12 receivable records showing all funds collected by or on behalf of Defendants in the last 13 sixty days in addition to all records showing accounts receivable currently outstanding, 14 including names, addresses, amounts and other documentation such as invoices and 15 account statements necessary for collection purposes; (3) all documents related to funds 16 owed to Defendants on behalf of credit/debit card processors and any other electronic funds 17 transfers due Defendants; and (4) all financial records such as bank account statements, 18 checking account registers and cash receipt records, showing transfer of funds to or from 19 JJD Produce in the last six months; and it is further 20 ORDERED, that Defendants and/or any banking institutions and money transfer 21 services used by Defendants shall, within five business days of service of this Order, 22 deliver any and all PACA trust assets held on Defendants’ behalf, up to $65,800.00, to 23 counsel for Plaintiff, Kirby & McGuinn, A P.C., Attn: Dean T. Kirby, Jr., Esq., 707 24 Broadway, Suite 1750, San Diego, California 92101-5393, to be held by Plaintiff’s counsel 25 pending further order of the Court; and it is further 26 ORDERED, that any and all funds belonging to JJD Produce, its successors, 27 subsidiaries, related, or parent companies, including JB Resources, in the possession of 28 third parties, including all funds belonging to JJD Produce, successors, subsidiaries, | related, or parent companies, including JB Resources on deposit at banking institutions or 2 held by money transfer services up to $65,800.00 shall, within five business days of service 3 of this Order, be immediately delivered to counsel for Plaintiff, Kirby & McGuinn, A P.C., 4 Attn: Dean T. Kirby, Jr., Esq., 707 Broadway, Suite 1750, San Diego, California 92101- 5 5393, to be held by Plaintiff's counsel pending further order of the Court; and it is further 6 ORDERED, that, within five business days of service of this Order, the attorneys \lfor Plaintiff are hereby authorized and directed to collect all outstanding accounts 8 receivable of JJD Produce, its successors, subsidiaries, related, or parent companies, ? including JB Resources, with any such sums collected to be held by Plaintiff's counsel up 10 || to $65 800.00 pending further order of the Court; and it is further I] ORDERED that Defendants shall take such steps as are necessary to preserve all of 12 || JJD Produce’s books and records, whether electronic or otherwise, and are required to fully 13 cooperate with Plaintiffs attorneys’ efforts to effect collection of the accounts receivable 14 |! of JID Produce, its successors, subsidiaries, related, or parent companies, including JB 15 Resources, 16 ORDERED that bond shall be waived in view of defendants now holding 17 $65,800.00 worth of Plaintiff’s assets; and it is further 18 ORDERED, that delivery of a copy of this Order to Defendants at their business 19 |! address of 7514 Girard Ave., Suite 1215, La Jolla, California 92037 via Federal Express, 20 || or other nationally recognized delivery service, shall be deemed to constitute notice of this 21 || Order upon Defendants, their agents, servants, and employees pursuant to Fed. R. Civ. P. 22 |! 65(d)(2). 23 IT IS SO ORDERED. 94 ||Dated: April 19, 2022 72 sale Os 25 Hon. Gonzalo P. Curiel 26 United States District Judge 27 28