L. Gillarde Co. v. Joseph Martinelli & Co., Inc.

L. Gillarde Company (Gillarde) (plaintiff) sold a carload of U.S. Grade No. 1 cantaloupes to Joseph Martinelli & Company, Inc. (Martinelli) (defendant). The purchase contract stated that the terms of sale were F.O.B. shipping point, “rolling acceptance final.” Gillarde assured Martinelli that the cantaloupes were inspected and graded U.S. No. 1 at the time of sale. Due to a delay by the railroad carrier, the shipment arrived nearly two weeks after the date of shipment. Martinelli notified Gillarde that it was rejecting the shipment because the cantaloupes were overripe and moldy. Inspection by the Department of Agriculture confirmed that the cantaloupes contained, on average, 85 percent Cladosporium mold. Martinelli abandoned the shipment, which the railroad carrier sold for salvage value. Without involving Martinelli, Gillarde filed a claim against the railroad for the invoice cost, which settled for half of that amount. Gillarde then filed a separate action against Martinelli under the Perishable Agricultural Commodities Act (PACA), seeking to recover the contract price minus the settlement amount from the railroad. Martinelli argued that it was entitled to reject the shipment because, based on the extent of decay, the cantaloupes could not have been U.S. Grade No. 1 at the shipping point. The buyer also contended that Gillarde was precluded from a second recovery after independently filing and settling a claim against the railroad. Gillarde filed a formal complaint with the United States Department of Agriculture.