Nearly 20 years ago the California Bankruptcy Court Reporter published a short piece I wrote titled The Perishable Agricultural Commodities Act and the Bankruptcy Code: A Trap for the Unwary. You can download it here if you're interested.
PACA, the acronym for the Act, is evidence of the continuing infatuation of Americans (and their representatives in Congress) with the virtuous yeoman farmer of yesteryear. No matter that farming today is a fully integrated corporate enterprise that bears almost no relationship to what most Americans imagine, farmers are the beneficiaries of much federal largesse. (For a summary of Wendell Berry's thoughts about the current state of American agribusiness go here. For some of mine go here and here.)
PACA permits unpaid farmer-sellers of perishable agricultural products, typically fruits, to get their money from their buyers ahead of virtually all other unpaid creditors. Now, I'm all in favor of folks getting what's owed them but why should sophisticated corporate farmers get paid ahead of everyone else? What about employees of a now-defunct buyer? What about all the other creditors who are getting stiffed? What about the buyer's bank?
Well, okay, no one much cares about the bank of the defaulting buyer of perishable agricultural commodities but such were my clients in an earlier life. Even if there is little sympathy for the lending industry it strikes me as simply another example of political rent-seeking to prefer farmers to banks that have followed state law to get a perfected security interest in the defunct buyer's assets.
All of which is to get to the latest foray of the courts into the battle between farmers and banks over the reach of PACA. You can go here to read an opinion of the federal Ninth Circuit Court of Appeals in which two judges asked the full court to review an earlier decision giving banks a work-around with respect to PACA. If you'd rather not wade through the full opinion you can read Bill Rochelle's summary here.
For what it's worth, I think the Ninth Circuit's earlier decision was wrong and that as a matter of statutory interpretation the farmers in this case should have prevailed over the lender. As a matter of principle, however, whether PACA was needed in the 1930's, it's no longer needed today. But I'm not holding my breath to see if the Republicans in Congress or the White House will take the opportunity to let the market rule in this aspect of the economy.