28 June 2017

Exciting PACA News!

(Warning: More inside legal-agribusiness baseball.)

(For my previous warning go here.)

Cognoscenti of the federal Perishable Agricultural Commodities Act (PACA) and the revised (as of 2001) state law in Article 9 of the Uniform Commercial Code will be excited to know that the Ninth Circuit en banc will take up a fascinating case that presents a collision between the purpose (but not the text) of PACA and some eye-glazing finagling in revised Article 9. Read a brief summary from the American Bankruptcy Institute here.

As I wrote here,
PACA permits unpaid farmer-sellers of perishable agricultural products, typically fruits and vegetables, 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?

The federal priority for payment afforded certain farmers is bad policy: "PACA is evidence of the continuing infatuation of Americans 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 today are the beneficiaries of much federal largess." On the other hand, what the revisers of Article 9 did for the benefit of purchasers of accounts receivable (which is too complicated to explain here) is equally an example of the success of rent-seeking.

So who should win in Boulder Fruit Express & Heger Organic Farm Sales v. Transportation Factoring, Inc.? My bet is that the Ninth Circuit will distinguish its earlier precedent and hold for the farmers. The federal statute usually prevails in close cases and the changes in law at the state-level Article 9 after Congress enacted PACA probably warrant such a result.

(For some earlier musings on PACA go here. For an article I wrote last century about PACA go here.)

No comments:

Post a Comment