G.W. Palmer & Co. v. Agricap Financial, No. 14-56059 (9th Cir. 2018)
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The en banc court vacated the district court's summary judgment for AgriCap in an action brought by produce growers under the Perishable Agricultural Commodities Act (PACA).
The en banc court joined other circuits and adopted a "true sale" test to determine whether assets transferred in transactions that are labeled "sales" remained assets of a PACA trust. The court held that a court must conduct a two-step inquiry when determining whether the questioned transaction is a sale or creates a security interest, i.e., a loan. First, a court must apply a threshold true sale test of which the transfer-of-risk is a key, but not the sole, factor. If a court concludes that there was a true sale, it must then determine if the transaction was commercially reasonable. The court held that a district court should look to the substance of the transaction to determine whether the transaction is a true sale or a secured loan. In doing so, the transfer of risk should be a primary factor to which a court looks.
Court Description: Perishable Agricultural Commodities Act The en banc court vacated the district court’s summary judgment in favor of defendant AgriCap Financial Corp. in an action brought by produce growers under the Perishable Agricultural Commodities Act, and remanded for further proceedings. The growers sold their perishable agricultural products on credit to Tanimura Distributing, Inc., a distributor, which made Tanimura a trustee over a PACA trust holding the perishable products and any resulting proceeds for the growers as PACA-trust beneficiaries. Tanimura sold the products on credit to third parties and transferred the resulting accounts receivable to AgriCap through a transaction AgriCap described as a “Factoring Agreement” or sale of accounts. Tanimura’s business later failed, and the growers did not receive payment in full from Tanimura for their products. The growers sued AgriCap, alleging: (1) that the Factoring Agreement was merely a secured lending arrangement structured to look like a sale; (2) that the accounts receivable and proceeds, therefore, remained trust property under PACA; (3) that because the accounts receivable remained trust property, Tanimura breached the PACA trust and AgriCap was complicit in the breach; and (4) that under PACA the PACA-trust beneficiaries,
This opinion or order relates to an opinion or order originally issued on February 27, 2017.
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