Boulder Fruit Express v. Transportation Factoring, Inc.

A group of growers of fresh fruit and vegetables, including Boulder Fruit Express (collectively, Boulder) (plaintiff), sold perishable produce to distributor Certified Organics (Certified) (defendant) on credit. Certified, in turn, sold the produce to customers who also purchased on credit, which resulted in accounts receivable in the amount of $4.7 million payable to Certified. Certified then sold its accounts receivable to a factoring company named Transportation Factoring, Inc. (Transfac) (defendant) for $3.297 million. Certified eventually defaulted on its payments to Boulder. Subsequently, Boulder sued Certified as well as Transfac. As to Transfac, Boulder alleged that Certified’s factoring resulted in a breach of trust under the Perishable Agricultural Commodities Act (PACA). According to Boulder, Transfac therefore acquired trust assets, in the form of the accounts receivable, in breach of the trust. The district court granted summary judgment in favor of Transfac. The district court reasoned that Transfac could not have breached the trust because Transfac had collected only $3.278 million on the accounts at the time of Certified’s default, which was less than what it had paid Certified. In the district court’s opinion, this meant that Transfac did not pay Certified any less than what the accounts were worth and thus could not have breached the trust. Boulder appealed.