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Produce Pay, Inc. v. Producers International, Inc.

United States District Court, D. Nevada

July 19, 2018

PRODUCE PAY, INC., Plaintiffs,
v.
PRODUCERS INTERNATIONAL, INC., Defendants.

          ORDER

         Presently before the court is plaintiff Produce Pay, Inc.'s motion for attorneys' fees. (ECF No. 22). Defendants Producers International, Inc. d/b/a Producers Fruit and Vegetable (the “company”) and Eduardo Reyes (the “principal, ” and collectively, the “defendants”) have not filed a response, and the time for doing so has since passed.

         I. Facts

         This is an action for breach of contract and violation of the Perishable Agricultural Commodities Act (“PACA”) arising out of defendants' failure to pay for mangoes subject to PACA protection, which defendants purchased from plaintiff. (ECF Nos. 1, 17, 20). On October 20, 2016, plaintiff filed its complaint. (ECF No. 1). Defendants neither appeared nor filed an answer to the complaint. (ECF No. 17). Plaintiff subsequently filed an application for entry of default judgment against defendants on August 3, 2017, which the court granted on March 14, 2018. Id.; (ECF No. 20).

         II. Discussion

         Plaintiff requests the court grant its motion for attorneys' fees against defendants, individually, and joint and severally, in the amount of $40, 682.25. (ECF No. 22).

         a. Plaintiff is entitled to recover under the UCC

         PACA allows for the recovery of attorneys' fees as “sums owing in connection with” perishable commodities transactions under PACA. See 7 U.S.C. § 499e(c)(2) (2010); see also Middle Mountain Land & Produce v. Sound Commodities, 307 F.3d 1220, 1222-25 (9th Cir. 2002). In produce transactions, the prevailing party has a contractual right to recover attorneys' fees and collection costs where such additional terms are included in an enforceable contract created by the invoices related to the transaction. U.C.C. § 2-207 (2002); Coosemans Specialties, Inc. v. Gargiulo, 485 F.3d 701, 709 (2d Cir. 2007).

         Pursuant to section 2-207 of the UCC, additional terms stated on the face of invoices relating to a produce transaction are binding upon the parties to the transaction. Diamond Fruit Growers, Inc. v. Krack Corp., 794 F.2d 1440, 1443-45 (9th Cir. 1986). Generally, under section 2-207, acceptance of terms that are additional to the original terms of an offer are treated as counteroffers, and operate as a rejection of the original offer. U.C.C. § 2-207 (2002). However, between merchants, the additional terms become part of the contract unless (i) acceptance is expressly limited to the terms of the original offer, (ii) the additional terms are objected to within commercially reasonable time, or (iii) the additional terms materially alter the terms of the contract. U.C.C. § 2-207(2) (2002); see also Diamond Fruit Growers, Inc., 794 F.2d at 1443-45.

         In this case, the defendants' offer to buy was not expressly limited to its terms, and the defendants did not object within a commercially reasonable time. Id.; (ECF Nos. 1, 17, 21, 22). Thus, the only issue is whether the “additional terms” materially altered the terms of the contract. Id.

         In defining the types of additional terms that could “materially alter” the existing contract, the UCC looks for provisions which would “result in surprise or hardship if incorporated without express awareness by the other party[.]” Official Comment 4 to U.C.C. § 2-207 (2002). The official comments to this UCC provision expressly state:

Examples of clauses which involve no element of unreasonable surprise and which therefore are to be incorporated in the contract unless notice of objection is seasonably given are: . . . a clause providing for interest on overdue invoices or fixing the seller's standard credit terms . . .
If no answer is received within a reasonable time after additional terms are proposed, it is both fair and commercially sound to assume that their inclusion has been assented to.

See Official Comments 5 & 6 to U.C.C. § 2-207 (2002).

         Here, under the UCC, the additional terms on the face of each of the plaintiff's invoices became agreed upon terms of the parties' contracts. The terms regarding attorneys' fees and collection costs on the face of the invoices are the plaintiff's standard credit terms upon which the plaintiff sells goods to any purchaser. (ECF Nos. 1, 17, 21, 22). These terms are standard contract terms throughout the produce industry and are generally expected to be present on invoices or other billing statements. Id. Given the general inclusion of these terms throughout the industry and plaintiff's regular use of the additional terms on its invoices, the additional terms regarding attorneys' fees and costs did not materially alter the existing contracts. Diamond Fruit Growers, Inc., 794 F.2d at 1443-45.

         Further, defendants never objected to the additional terms when they received and accepted the produce identified on the unpaid invoices. Id. As a result, the amounts due under these additional provisions became a part of the plaintiff's PACA trust claim as sums owing in connection with the produce transactions between the plaintiff and the defendants by virtue of 7 U.S.C. § 499e(c)(2) (2010) (trust survives until debtor makes “full payment of the sums owing in connection with such transactions”). Accordingly, plaintiff is entitled to recover under U.C.C. § 2-207.

         b. Plaintiff is entitled to recover under PACA

         The Ninth Circuit has held that additional terms included on the face of invoices for the sale of goods are considered terms of the contract. U.S. ex rel. Hawaiian Rock Prods. Corp. v. A.E. Lopez Enters. Ltd., 74 F.3d 972, 976 (9th Cir. 1996). Terms on invoices, including attorneys' fees and costs of collection contained on the face of the invoice, are enforceable as additional terms of contract because they are sums “owing in connection with such transactions, ” as provided under PACA § 5(c)(2) (2010).

         In Weis-Buy Servs., et al. v. Christopher Ranch, et al., 361 F.3d 629, 632 (11th Cir. ...


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