Bocchi Americas Associates, Inc. v. Commerce Fresh Marketing, Inc.

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit

FILED
January 23, 2008

No. 06-20939 Charles R. Fulbruge III
Clerk

BOCCHI AMERICAS ASSOCIATES INC

Plaintiff-Appellant
v.

COMMERCE FRESH MARKETING INC; DIRAN A. ELSAIFI

Defendants-Appellees

Appeal from the United States District Court
for the Southern District of Texas

Before WIENER, DeMOSS, and PRADO, Circuit Judges.
PRADO, Circuit Judge:
Plaintiff-Appellant Bocchi Americas Associates, Inc. appeals the district
court’s entry of judgment in favor of Defendant-Appellee Diran A. Elsaifi. For
the reasons stated below, we affirm.
I. FACTS AND PROCEDURAL HISTORY
A. Factual Background
Bocchi Americas Associates, Inc. (“Bocchi”), a Delaware corporation, is a
wholesale supplier of fresh fruits and vegetables. Between December 10, 2002,
and June 27, 2003, Bocchi sold and delivered twenty shipments of perishable
agricultural commodities to Commerce Fresh Marketing, Inc. (“CFM”), a Texas
 No. 06-20939

corporation. The parties have stipulated that CFM failed to pay for many of
these deliveries and that CFM owes Bocchi $123,000.
On June 27, 2003, Bocchi sent its last invoice to CFM. CFM claims that
on the date of the last invoice, Diran A. Elsaifi (“Elsaifi”), CFM’s president and
sole shareholder, mailed to Bocchi a check for $2,000 accompanied by a letter
requesting that Bocchi accept weekly payments of $2,000 until the full balance
was paid. The letter stated, in part,
Enclosed please find a payment in the amount of $ 2,000.00 to be
applied to Commerce Fresh Marketing, Inc.’s account with Bocchi
Americas, Inc.. [sic] Pursuant to our agreement, Bocchi Americas
Inc.. [sic] will accept partial payments to be applied towards this
account, on a weekly basis until the balance of $103,132.85 is paid.

Should the above correctly reflect the terms of our payout
agreement, please deposit the check, apply the amount against the
account balance, and send a new statement reflecting the new
balance due on the account.

Bocchi deposited the check but claims it never received the above-quoted letter.
Nevertheless, between July 2003 and October 2004, Bocchi accepted
approximately seven additional $2,000 payments and applied them to CFM’s
unpaid invoices.1 On December 9, 2003, Bocchi’s president, Tom Leonardi, sent
a fax to CFM demanding it begin making weekly payments to settle three
overdue invoices. The overdue amount was never paid, and on June 23, 2004,
Bocchi filed this suit.
On July 13, 2004, CFM again wrote to Bocchi, proposing to make monthly
payments of $2,000 until the end of 2004 and monthly payments of $5,000
thereafter. Leonardi responded three days later in a handwritten fax that
stated, in part,

1
CFM also made $5,000 payments in November and December of 2004.

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Bocchi Americas does not wish to hinder the operations of
Commerce Fresh but the complete balance due of $158,577.00 is to
be paid in full immediately.
A set monthly payment has never been agreed nor your
proposed $2000.00 monthly payout cannot be deemed acceptable.
All files must be paid as invoiced to you as stated.
Don, you have promised to pay complete invoices in full within
a year’s time and only limited file payments have been done.

On November 10, 2004, Bocchi and CFM entered into an agreement in
which Bocchi agreed to dismiss its July 2005 court date in exchange for CFM’s
promise to pay the outstanding balance of its debt. CFM agreed to make $5,000
monthly payments in November and December 2004, and $20,000 monthly
payments thereafter until the remaining balance was paid. CFM made the first
two payments but defaulted on the remaining debt. Bocchi then moved forward
with this suit.
B. Procedural History
On June 23, 2004, Bocchi filed this suit against CFM and Elsaifi, alleging
common law breach of contract and seeking damages under the Perishable
Agricultural Commodities Act of 1930 (“PACA”), as amended, 7 U.S.C. § 499a,
et seq. By consent of the parties, a magistrate judge conducted all proceedings
in this case, including a bench trial and entry of final judgment. See 28 U.S.C.
§ 636(c).
On October 6, 2006, the magistrate judge entered final judgment on behalf
of Bocchi and against CFM, awarding $123,000 plus prejudgment interest,
postjudgment interest, and attorneys’ fees. However, the magistrate judge ruled
that Bocchi waived its rights to special trust protection under PACA and that
therefore, there was no basis for judgment against Elsaifi. Bocchi filed this
timely appeal, challenging the magistrate judge’s conclusion that Bocchi waived
its rights under PACA.

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C. Statutory Scheme
Congress originally enacted PACA “to regulate the sale of perishable
commodities and promote fair dealing in the sale of fruits and vegetables.”
Reaves Brokerage Co. v. Sunbelt Fruit & Vegetable Co., 336 F.3d 410, 413 (5th
Cir. 2003) (internal quotation marks omitted). PACA requires buyers of produce
to make “full payment promptly.” 7 U.S.C. § 499b(4). If a buyer fails to do so,
the seller may file a complaint with the United States Department of Agriculture
or file a civil suit against the buyer.2 Id. § 499e(a), (b).
In 1984, Congress amended PACA to strengthen the rights of sellers of
perishable commodities on short-term credit. See Am. Banana Co. v. Republic
Nat’l Bank of N.Y., N.A., 362 F.3d 33, 37 (2d Cir. 2004). PACA now gives these
sellers two powerful tools with which to enforce buyers’ payment obligations.
First, PACA creates, immediately upon delivery of the produce, a nonsegregated
“floating” trust in favor of unpaid sellers, which attaches to the products
themselves and any proceeds. 7 U.S.C. § 499e(c)(2); 7 C.F.R. § 46.46(b); see also
Reaves, 336 F.3d at 413. If the seller is not paid promptly, the buyer must
preserve trust assets, and the seller has a “superpriority” right that trumps the
rights of the buyer’s other secured and unsecured creditors. Reaves, 336 F.3d at
413.
Second, PACA imposes secondary liability on persons who are in a position
to control the trust assets and fail to do so. Golman-Hayden Co. v. Fresh Source
Produce Inc., 217 F.3d 348, 351 (5th Cir. 2000). Thus, if the buyer’s assets are
insufficient to satisfy the seller’s claim, this provision allows a seller to seek

2
More specifically, the buyer may enforce its PACA trust rights either by seeking a
reparation order from the Secretary of Agriculture and subsequent judicial enforcement, 7
U.S.C. §§ 499f, 499g, or through a civil suit against the buyer for breach of fiduciary trust, 7
U.S.C. § 499e(c)(5).

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payment from the buyer’s principals, individually.3 That power is particularly
important in cases such as this where the corporate buyer is no longer in
business, and a common-law breach of contract claim only would yield an
unenforceable judgment.4
In order to take advantage of these powers, however, the PACA statute
and regulations set forth specific rules that sellers must follow. Relevant to this
appeal, PACA applies only to produce sold on a short-term credit basis, in
accordance with the statute’s “full payment promptly” provision. See 7 U.S.C.
§ 499b(4). “Full payment promptly” means payment within ten days after the
buyer accepts the produce. See 7 C.F.R. § 46.2(aa)(5),(11). However, a buyer and
seller may agree to extend the time for payment, as long as the aggregate time
for payment does not exceed thirty days after the buyer receives and accepts the
commodities. Id. § 46.46(e)(2). Therefore, if a seller of produce agrees to extend
the time for payment more than thirty days following delivery and acceptance
of the produce, the seller may no longer assert any right to a PACA trust or seek
recovery from a principal of the buyer. See Idahoan Fresh v. Advantage Produce,
Inc., 157 F.3d 197, 206 n.9 (3d Cir. 1998). Under this rule, the magistrate judge
in this case found that Bocchi and CFM had entered into an such an agreement,
and therefore, Bocchi’s right to PACA trust protection was lost.
II. STANDARD OF REVIEW AND JURISDICTION
We review the district court’s findings of fact for clear error and
conclusions of law de novo. Lewis v. Dretke, 355 F.3d 364, 366 (5th Cir. 2003).

3
Although similar in effect, this provision does not derive from a “piercing of the
corporate veil” theory. Rather, this individual liability is premised on the breach of the
individual’s fiduciary duty to protect PACA trust assets. See Golman-Hayden, 217 F.3d at 351
n.18. In this case, Bocchi uses this provision to seek recovery directly from Elsaifi.
4
CFM filed for Chapter 7 bankruptcy liquidation on November 17, 2007.

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We have jurisdiction to hear an appeal of the final judgment of a district court
under 28 U.S.C. § 1291.

III. DISCUSSION
PACA imposes a strict set of requirements on produce sellers seeking to
benefit from the law’s protections. Relevant to this appeal is the rule that a
seller may enter into a pre-transaction payment agreement and still qualify for
PACA trust protection only if the agreement does not extend the date for
payment beyond thirty days after the buyer’s receipt and acceptance of the
commodities. 7 C.F.R. § 46.46(e)(1)-(2). Notably, the PACA statute and
regulations explicitly refer only to pre-transaction agreements. See, e.g., 7
U.S.C. § 499e(c)(3) (“The unpaid supplier, seller, or agent shall lose the benefits
of such trust unless such person has given written notice of intent to preserve
the benefits of the trust to the commission merchant, dealer, or broker within
thirty calendar days . . . (ii) after expiration of such other time by which payment
must be made, as the parties have expressly agreed to in writing before entering
into the transaction . . . .” (emphasis added)); 7 C.F.R. § 46.46(e)(1) (“Parties who
elect to use different times for payment must reduce their agreement to writing
before entering into the transaction . . . .”).
The PACA statute and Fifth Circuit precedent are silent on whether the
thirty-day limit also applies to agreements made after the buyer and seller have
entered into the transaction. However, five circuits have held that the thirty-
day limit does apply to post-transaction agreements. See Am. Banana Co. v.
Republic Nat’l Bank of N.Y., N.A., 362 F.3d 33, 43-44 (2d Cir. 2004); Overton
Distribs., Inc. v. Heritage Bank, 340 F.3d 361, 366-68 (6th Cir. 2003); Patterson
Frozen Foods, Inc. v. Crown Foods Int’l, Inc., 307 F.3d 666, 669-71 (7th Cir.
2002); Greg Orchards & Produce, Inc. v. Roncone, 180 F.3d 888, 892 (7th Cir.

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1999); Idahoan Fresh v. Advantage Produce, Inc., 157 F.3d 197, 208-09 (3d Cir.
1998); In re Lombardo Fruit & Produce Co., 12 F.3d 806, 809-10 (8th Cir. 1993).
Following the overwhelming weight of authority, and in conformance with the
underlying purpose of PACA, we hold that the thirty-day limit extends to post-
transaction agreements.
In enacting the PACA statute, Congress sought to provide trust
protections only to sellers extending short-term credit to buyers:

[T]he committee does not intend the trust to apply to any credit
transaction that extends beyond a reasonable period. Under the
bill, the Secretary is required to establish, through rulemaking, the
time by which, the parties to a transaction must agree payment on
a transaction must be made, to qualify it for coverage under the
trust. An agreement for payment after such time will not be eligible
to receive the benefits of the trust.

H.R. REP. NO. 98-543, at 7 (1983), as reprinted in 1984 U.S.C.C.A.N. 405, 410.
PACA regulations set that “reasonable period” at thirty days following delivery
of the produce and acceptance by the buyer. 7 C.F.R. §§ 46.46(e)(1)-(2),
46.2(aa)(5), (11).
PACA also requires sellers, in the event of default, to promptly pursue
judicial and administrative remedies. Am. Banana, 362 F.3d at 38. “The sellers’
prompt resort to administrative remedies was intended to isolate and to put
pressure on financially insecure buyers to meet their obligations or to be forced
from the business.” Id. The primary objective of this requirement is to protect
sellers from volatility in the produce industry, where producers and shippers
were, at least at the time PACA was first enacted, predominantly small
businesses. See id. at 44 (citing H.R. REP. NO. 98-543, at 2-4).
Failing to apply the waiver rule to post-default agreements could actually
encourage long-term credit arrangements, because sellers could offer longer-
term forbearance to delinquent buyers with the knowledge that the seller would

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still be protected by the PACA trust. Such a result would undermine PACA’s
intent—which is to protect small sellers who need prompt payment to
survive—and would unfairly benefit PACA sellers with respect to other secured
and unsecured creditors of the defaulting buyer.5 Based on the clear policy of the
PACA statute, we conclude that a PACA seller does not lose PACA benefits by
entering into a post-transaction agreement to extend credit terms for up to thirty
days following delivery and acceptance, but the seller does forfeit its PACA trust
protections if such an agreement extends payment beyond thirty days after
delivery and acceptance of the commodities in question.6
Now that we have determined that a post-transaction agreement may
waive PACA trust rights, we consider whether the parties in this case entered
into such an agreement. The magistrate judge found sufficient evidence to prove
the existence of an oral agreement and, in the alternative, a written agreement.7
The question of whether an oral agreement is sufficient to effect a waiver

5
In addition, contrary to PACA’s purpose, allowing a PACA trust-protected seller to
receive payments beyond thirty days while retaining its trust protections would actually
increase uncertainty in the agriculture market. A buyer’s other secured and unsecured
creditors would face the possibility of a seller asserting its PACA trust superpriority rights far
into the future. In the meantime, those creditors would see the PACA-protected seller
extracting preferential payments from the already-delinquent buyer.
6
Bocchi argues that In re Baiardi Chain Food Corp., PACA Docket No. D-01-0023
(U.S.D.A. 2005), dictates the opposite result and that this U.S.D.A. decision is entitled to
deference as an agency interpretation of a statute. The Baiardi case, however, involves a
question of whether a buyer complied with the “full payment promptly” provision in PACA and
does not involve a question of waiver of trust provisions by agreement. Therefore, Baiardi has
no bearing on these facts.
7
The magistrate judge concluded, based on the record, that Bocchi must have made a
“business decision” to agree to extend payment beyond thirty days, thereby waiving its trust
protections. Indeed, Bocchi’s accounts receivable manager testified at trial: “I believe Bocchi
was giving Commerce Fresh a chance to pay.” As the parties explained at oral argument,
Bocchi had reason to believe it stood a better chance of recovering on CFM’s debt by allowing
the buyer more time to pay. If Bocchi had sought immediate enforcement of the debt—as
PACA requires—CFM likely would have been forced into bankruptcy, and Bocchi presumably
would have recovered little.

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or forfeiture of PACA trust rights is an issue of first impression in our circuit.
However, three of the four circuits that have expressly addressed the issue have
held that only written agreements can effect such a waiver. See Patterson, 307
F.3d at 669-70; Idahoan Fresh, 157 F.3d at 205; Hull Co. v. Hauser’s Foods, Inc.,
924 F.2d 777, 781-82 (8th Cir. 1991). To date, the Second Circuit is the only one
to hold that oral agreements suffice to waive PACA trust protection. Am.
Banana, 362 F.3d at 46-47. We agree with that majority of circuits and adopt
the rule that waiver or forfeiture of PACA trust rights by entering into an
extension agreement requires an agreement in writing.8 We next consider,
therefore, whether the parties in this case entered into such a written
agreement.
First, we must decide what type of writing would be sufficient to prove a
written agreement. The Seventh Circuit has held that a formal written
agreement is not required to waive the seller’s rights under PACA; rather, all
that is required are writings sufficient to satisfy the statute of frauds. Patterson,
307 F.3d at 671. In Patterson, the court reasoned that because a PACA trust can
be created by letters, invoices, and other informal writings, the trust provisions
may also be waived by informal writings. Id. at 671. Other courts considering
this question have followed Patterson’s approach. See, e.g., Am. Banana, 362
F.3d at 47; In re Dixie Produce & Packaging, L.L.C., 368 B.R. 533, 536 (Bankr.
E.D. La. 2007). We find this reasoning persuasive. Therefore, we conclude all
that is needed to evidence an agreement are writings sufficient to satisfy the
applicable statute of frauds.
Next, we consider whether the writings in this case satisfy the statute of
frauds. To satisfy the Texas statute of frauds, a promise may be evidenced by
a “memorandum of” the promise that is (1) in writing and (2) signed by the party

8
As we hold that an oral agreement will not suffice, we do not review the magistrate
judge’s evidentiary ruling on the existence of an oral agreement.

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to be charged with the promise. TEX. BUS. & COM. CODE ANN. § 26.01(a).
Writings between parties must be complete within themselves as to every
material detail and contain all the essential elements of the agreement. Cohen
v. McCutchin, 565 S.W.2d 230, 232 (Tex. 1978). The statute of frauds writing
requirement may be satisfied by two or more documents. Padilla v. LaFrance,
907 S.W.2d 454, 460 (Tex. 1995). Further, the “memorandum” need not embody
all of the terms agreed upon. Botello v. Misener-Collins Co., 469 S.W.2d 793,
794-95 (Tex. 1971).
In the instant case, there are a number of writings, which, taken together,
evidence an agreement between Bocchi and CFM to extend payment beyond
thirty days. For example, the June 27, 2003 letter from CFM was an explicit
offer. The letter specified a means of acceptance of the offer: cashing the
enclosed $2,000 check. Although the magistrate judge made no explicit finding
on whether Bocchi actually received this letter, the magistrate judge did make
a factual finding that it was standard procedure between the parties to construe
a failure to respond to an offer as an acceptance. Nevertheless, this letter alone
would not satisfy the statute of frauds as against Bocchi because it lacks a
signature from Bocchi’s representative.
Taken together with Leonardi’s July 16, 2004 fax, however, these writings
satisfy the statute of frauds. The July 2004 fax provides evidence of an explicit
agreement: “Don, you have promised to pay complete invoices in full within a
year’s time and only limited filed payments have been done.” The handwritten
fax lacks a formal signature, but Leonardi’s name is written in the “From” field
and the fax is written under Bocchi corporate letterhead. See TEX. BUS. & COM.
CODE ANN. § 1.201(b)(37) (“‘Signed’ includes using any symbol executed or
adopted with present intention to adopt or accept a writing”); Fulshear v.
Randon, 18 Tex. 275, 277 (1857) (“If he writes his name in any part of the
agreement, it may be taken as his signature, provided it was there written for

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the purpose of giving authenticity to the instrument, and thus operating as a
signature.”).
To evidence an agreement, the writings must satisfy all the elements of
contract formation under Texas law: offer, acceptance, and a “meeting of the
minds.” Prime Prods., Inc. v. S.S.I. Plastics, Inc., 97 S.W.3d 631, 636 (Tex. App.
2002). “An offer results in a binding contract upon acceptance by the other party
according to its terms.” Fail v. Lee, 535 S.W.2d 203, 208 (Tex. App. 1976).
Performance of the act which the offeree was requested to promise to perform
may constitute valid acceptance. Thomas v. Reliance Ins. Co., 617 F.2d 122, 128
(5th Cir. 1980).
Bocchi contends that the acceptance and meeting of the minds elements
are missing from the record documents. Nevertheless, we find sufficient
evidence of these elements in the above-described writings. Bocchi’s agreement
is evidenced by its acceptance of the initial $2,000 check and at least seven
additional payments, as well as Leonardi’s statement in his July 2004 fax
explicitly referencing the agreement. Accordingly, we find there is sufficient
evidence of a written agreement to satisfy the statute of frauds, and therefore
Bocchi has waived its PACA trust rights.9 As a result, Bocchi has no cause of
action against Elsaifi under PACA.
IV. CONCLUSION
We find that Bocchi waived its right to PACA trust protection by entering
into a written post-transaction agreement to allow CFM to make payments
beyond thirty days after delivery of the produce. Therefore, we AFFIRM the
magistrate judge’s judgment in favor of Elsaifi.
AFFIRMED.

9
Because we find sufficient written evidence of an agreement in these writings, we need
not consider whether the November 2004 agreement may be considered as evidence of Bocchi’s
willingness to agree to a payment period in excess of thirty days.

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