Kingdom Fresh Produce, Inc., et al. v. Stokes Law Office, L.L.P. (In the Matter of Delta Produce, L.P.)

Citation:
No. 14-51079 Fifth Circuit Court of Appeals
Tag(s):
Ruling:
Attorney could not be paid his fees and expenses allocable to an objecting PACA claimant as 7 U.S.C. § 499e(c)(2) requires that buyers of perishable agricultural commodities must hold receivables or proceeds from the sale of those commodities in trust for the benefit of all unpaid sellers “until full payment of the sums owing in connection with such transactions has been received” by the sellers. While leaving a potential door for compensation open for payment of a bankruptcy trustee's fees, the Fifth Circuit found no applicable exception for the "Special PACA Counsel" in this case.
Procedural context:
After the bankruptcy court approved Stokes' fees, a lone dissenting PACA creditor appealed to the district court. With respect to the fees, the district court relied on the language of the statute and C.H. Robinson Co. v. Alanco Group, 239 F.3d 483 (2d Cir. 2001), to hold that because Stokes “[e]ssentially . . . acted as a trustee for the PACA trust,” he was not entitled to attorney’s fees paid out of the trust unless and until the trust beneficiaries were paid in full. Id. at 745. In its view, the award of any fees “before PACA trust beneficiaries receive full payment would directly violate the language of PACA and its regulations.” Stokes appealed to the Fifth Circuit. Before addressing the PACA issue, the court found that the Appellee had waived any Stern issues by consent. It also ruled that the district court had not had appellate jurisdiction over the two interim fee application upon which it ruled. Finally, before turning to the ultimate issue of whether or not Stokes could receive remuneration from the PACA trust he had created, the Court used the “person aggrieved” test to narrow the fee question from the entire fee ($206,371) to the pro rata share of the fee allocable to the objecting PACA creditor (which was only $15,653.44) as the other creditors agreed with Stokes' payment from the res.
Facts:
In late 2011, various unpaid sellers of perishable produce sued Delta Produce, L.P. and Superior Tomato-Avocado—San Antonio-area “repackers” that purchased produce from farmers that they then sold to grocers—and Delta’s individual owner in district court for claims arising under the Perishable Agricultural Commodities Act (PACA), a Depression-era statute designed to protect sellers of perishable produce from delinquent purchasers. Delta and Superior filed Chapter 11's and the PACA litigation was referred to the bankruptcy court with the plaintiffs' explicit consent. The various PACA claimants then brought in attorney Craig Stokes to be "Special PACA Counsel." As Special PACA Counsel, Stokes was deputized to “take those steps reasonably necessary to preserve and collect the PACA trust assets . . . and to facilitate the distribution of the collected PACA trust assets.” The order also provided for Special PACA Counsel’s “fees and costs” at a rate of $350 an hour. Those fees and costs would be paid from the PACA trust funds. After diligently working to create a PACA "res," Stokes sought payment for his efforts from the trust assets he had collected.
Judge(s):
Before REAVLEY, PRADO, and COSTA, Circuit Judges.

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