Jan. 7, 2020

Lenders, Vendors and Landlords of Food Service Businesses Beware - Your Rights Under Your Agreements May Be Subordinated or Eliminated Under Federal Law

Recent bankruptcy court cases throughout the country involving restaurants, supermarkets and meat and produce wholesalers have again pointed out the significance of the Federal Perishable Agricultural Commodities Act (PACA), and how this law's provisions can subordinate or even eliminate the rights and remedies of lenders, vendors and landlords of any of these businesses that seek bankruptcy protection or just fail.

PACA (which can be found at  7 USC 499a  et seq.) was enacted by Congress a number of years ago after heavy lobbying pressure was brought by those representing American farmers and those who sell and distribute perishable farm products. The protection afforded to the beneficiaries of the act, those who sell produce in similar commodities as well as unpackaged meats, are superior to the rights granted to creditors by agreement or other statutes in the event that the charges for the purchase of the perishable agricultural commodities have not been paid to the vendors/beneficiaries of the act.

PACA creates a trust in a debtor's inventory of perishable agricultural commodities and any proceeds therefrom, including accounts receivable, for the benefit of the unpaid vendors. In creating this trust, Congress intended that the rights and remedies of those who are left unpaid as vendors of the perishable agricultural commodities will have rights that are superior to any lien, security interest or other right granted by agreement or statute. This means that lenders, landlords  and vendors that may have a perfected security interest or other lien rights in inventory of perishable agricultural commodities and/or the proceeds and accounts receivable generated therefrom will have their security interest and lien rights subordinated to the rights of the beneficiaries of the PACA trust.  The rights and remedies of the beneficiaries of the trust extend to any business that purchases perishable agricultural commodities as part of their business activities, which can include restaurants, commercial caterers, food service purveyors, supermarkets, wholesale clubs, meat and produce wholesalers and the like.

Additionally, a majority of the bankruptcy courts now hold that the owners and principals of the perishable agricultural commodities businesses may not be discharged in bankruptcy based upon the concept of a breach of fiduciary duty. This has the effect of substantially curtailing or totally eliminating rights of those who hold a guarantee from those individuals.

All of this points out the need for heightened awareness, special care and proactive credit underwriting when dealing with those businesses that may be subject to the provisions of PACA.

The attorneys at Tripp Scott have substantial experience in dealing with the best ways to protect lenders, vendors and landlords of those dealing with the food service industry, and also how best to recover unpaid obligations in the event of a bankruptcy proceeding or business failure.



Christina V. Paradowski has been elected chair-elect of Hispanic Unity of Florida’s (HUF) board of directors

FORT LAUDERDALE, Fla., February 19, 2021 – Tripp Scott, P.A. is proud to announce that Christina V. Paradowski, a director with the firm’s creditors’ rights and bankruptcy practice, has been elected chair-elect of Hispanic Unity of Florida’s (HUF) board of directors. 

“As someone who truly believes in HUF’s mission, it’s an honor to be elected chair-elect of their board of directors,” said Paradowski. “Hispanic Unity provides a community to help our neighbors acclimate to their new lives and gives them the tools so that they can fulfill their potential as civically, socially, and professionally engaged members of our community. I look forward to continuing to serve with my fellow board members as we find ways to expand HUF’s impact in South Florida.”

Shareholders clauses strengthen business, avoid litigation

As Published in Florida Trend

Partners often go into business together with the best of plans. But what happens when those plans go awry? Ideas for the business’s future may stray in different directions, partners may accuse each other of self-dealing, or one may give a spouse or family member an ownership stake — and a say in the business’s future. 50/50 disputes, selling or bequeathing of shares or ownership, minority ownership rights, and other such issues are not wholly unpredictable. Yet just like credit and debt, tax liabilities, or competition and market forces, shareholder disputes can have a material impact on the business.

Can You Count On Your Employer to Help You Get the Covid-19 Vaccine?

Employers may offer transportation or other incentives, but getting actual shots to workers remains unlikely—for now

With the Covid-19 vaccine slowly rolling out, many workers are wondering whether they can count on their employer to help them get shots.

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