Boulder Fruit Express & Heger Organic Farm Sales v. Transportation Factoring, Inc.

I. Background

This case concerns the Perishable Agricultural Commodities Act (PACA), 7 U.S.C. §§ 499a-499t (2000). Appellants 2 are growers of fresh fruits and vegetables. From April 1996 to April 1997, appellant growers sold perishable goods to Certified Organics 3 on credit. Certified was in the business of purchasing fresh agricultural produce from growers for resale. Certified resold the produce and invoiced its customers, creating accounts receivable. Certified then sold its accounts receivable to Transportation Factoring, Inc. (Trans-fac) pursuant to a factoring agreement. Under that agreement, Transfac purchased the accounts from Certified for 80% of their face value.

When Certified defaulted in its payments to the growers, the growers sued not only Certified but also Transfac. Why Transfac? The growers allege that Certified’s factoring of its accounts to Transfac breached a statutory trust created by PACA for the benefit of the growers. They allege that Certified was to have held the accounts receivable in trust for the growers until the growers were paid for *1270 their produce. They allege that in factoring Certified’s accounts receivable, Trans-fac acquired “trust…