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The Ninth Circuit granted rehearing en banc on a case that could eliminate a circuit split on a major issue involving the federal Perishable Agricultural Commodities Act, or PACA (7 U.S.C. § 499a et seq.).

The issue is important in California, a major agricultural producer. In Boulder Fruit Express & Heger Organic Farm Sales v. Transportation Factoring, Inc., 251 F.3d 1268 (9th Cir. 2001), the Ninth Circuit created a loophole in 2001 where a wholesaler’s lender could easily preclude farmers from being protected by PACA. Bound by Boulder, a panel ruled against the farmer in a per curiam decision in February. S&H Packing & Sales Co. v. Tanimura Distributing Inc., 850 F.3d 446 (9th Cir. Feb. 27, 2017).

However, two judges on the panel wrote a 19-page concurrence arguing that Boulder Fruit was “wrongly decided” and urging the circuit to sit en banc to bring “the Ninth Circuit into line with the other circuits that have considered the issue.” The Ninth Circuit granted rehearing en banc on June 23 and tentatively scheduled oral argument during the week of Sept. 18.

PACA creates a statutory trust protecting growers from not being paid for their fresh produce and gives them protection ahead of accounts receivable financing. However, farmers do not have recourse under PACA against purchasers of the receivables. Before putting farmers behind purchasers of receivables, the Second, Fourth and Fifth Circuits require the court first to decide if a true sale actually occurred and, second, to examine whether the sale was commercially reasonable. 

In Boulder Fruit, the Ninth Circuit split with its sister circuits by holding, in the case of documentation labeled as a sale of accounts receivable, that the court need only decide whether the transaction was commercially reasonable before cutting off PACA protection. There has been no threshold test in the Ninth Circuit to determine whether the transaction qualifies as a true sale.

S&H Packing, the case to be reheard en banc, appears to be a test case involving a transaction labeled as a sale of receivables that might not have been a true sale because the purchaser had the right to force the seller to repurchase accounts not paid within 90 days.

To read ABI’s discussion of the per curiam opinion in February, click here.

The case is S&H Packing & Sales Co. v. Tanimura Distributing Inc., 14-56059 (9th Cir.).

A court-appointed trustee for bankrupt Molycorp Minerals LLC will ask a judge Friday to approve the sale of the last remaining assets associated with a rare-earth mine at Mountain Pass, Calif. But a lawsuit over mineral rights and complaints by the losing bidder for those assets are complicating efforts to reopen the mine, Bloomberg News reported yesterday. The dispute pits Oaktree Capital Management LP, which owns the most advanced ore processing equipment at the mine, against JHL Capital Group and QVT Financial LP, which control the most important mineral rights at the site. All of them held debt in Molycorp’s now-defunct parent, Molycorp Inc. until they traded their $1.9 billion in claims for different parts of the company. The court-appointed trustee held an auction on June 14 for the remaining parts of the mine hoping to attract a buyer to restart production and take responsibility for about $100 million in cleanup costs.

After a bankruptcy auction where four bidders vied for battery maker Aquion Energy Inc., an entity called Juline-Titans LLC had the winning $9.16 million bid, the Pittsburgh Post-Gazette reported today. The firm, which registered in Delaware on May 30, is an affiliate of the China Titans Energy Technology Group. Titans is an investment holdings company that “engages in research, development, manufacture and sale of electric products and equipment” in China. Aquion, the Lawrenceville, Pa.-based saltwater battery manufacturer, filed for bankruptcy in March after a decade of raking in Silicon Valley bonafides and capital. It will go before a bankruptcy judge to certify the sale.

Bebe Stores Inc. has done what few other retailers have been able to do recently — close all of its stores without seeking bankruptcy protection, the Wall Street Journal reported today. The mall-based retailer, which announced in April it would be closing all of its roughly 180 locations, was able to cut deals with its many landlords outside of a bankruptcy filing. Bebe’s brand name and website will live on through a joint venture agreement with Bluestar Alliance LLC, which it had signed last year. The company said in an earlier Securities and Exchange Commission filing that it intends to transfer its domain name, social media accounts and international wholesale agreements to Bluestar Alliance.