PACA TRUST ENFORCEMENT

The trust provisions of the PACA impose a trust on the produce related assets of a produce buyer for the benefit of its unpaid produce suppliers. The buyer is required by law to maintain its produce inventory and the receivables from the sale of that produce as a fund from which to make payment to the seller. If the buyer fails to pay, the seller's recourse is to seek payment from these trust assets. A PACA trust enforcement lawsuit has three basis steps: (a) liquidate and obtain whatever produce related assets are in the hands of the buyer; (b) recover any PACA trust assets the buyer transferred to others such as its bank; and (c) seek to have the buyer's owners pay any shortfall from their personal assets. A lawsuit to enforce the PACA trust will either be in the U.S District Court, or if the buyer files for bankruptcy protection, in the U.S. Bankruptcy Court.

We handle PACA trust enforcement cases on the premise that our clients judge our service based on three factors: (a) how much is recovered; (b) how long recovery takes; and (c) how much it costs. Clients also want to be kept informed as to what is going on. We take these concerns seriously and center our practice philosophy on these goals. We attempt to be streamlined in our litigation strategy by taking actions that will bring maximum results without wasting time on endless procedural matters. Of course, we must pursue these goals following the procedures required under our legal system. When we face unforeseen obstacles from the law, facts and opposing attorneys, we use our ingenuity to resolve the problem. Whenever possible, we forge relationships with all parties to work through an agreeable solution. Sometimes we need to fight for our client's rights through a court determination of the issues and subsequent appeals.

Over the years, we have developed the systems, strategies, and innovations necessary to obtain favorable results and to provide exceptional service to our clients. We have developed the following innovations in handling PACA Trust enforcement cases:

• Share information with other PACA creditors to move quickly on insolvent buyers;

• Pool the claims of PACA trust creditors to share legal expenses and obtain negotiating leverage;

• Establish group voting procedures so that a majority can approve settlement offers; and

• Provide courts with tested PACA trust claims procedures to expedite the liquidation of PACA trust assets and the determination of valid PACA trust claimants.

Our unparalleled experience in PACA trust enforcement actions is demonstrated by the following accomplishments since 1989:

• Represented 1,361 clients in 488 PACA trust collection actions;

• Sought recovery of $57,735,380 in PACA trust claims for clients and recovered $36,462,660;

• Achieved a 63% average recovery rate; and

• Served as lead counsel for PACA creditors in eight of the ten largest insolvencies in PACA enforcement history.

BUSINESS LITIGATION

Many of our attorneys have produce industry or agriculture backgrounds, making them the natural choice for legal representation in disputes unique to produce companies. We understand the industry and the way it works, which saves our clients the time and expense otherwise required to educate attorneys on how they conduct business. In legal conflicts, we are strong believers in alternative dispute resolution backed by a willingness to pursue litigation with biblical zeal when circumstances dictate. In addition to litigation under PACA, the Firm has handled many different types of cases in state and federal courts involving grower-shipper disputes, cold storage contracts, joint ventures, grower contracts, bank disputes, consignment contracts and termination of employment. Since 1989, we have defended over a hundred clients in business litigation cases and saved them nearly $3,000,000.

FEDERAL AND STATE REGULATORY MATTERS

We work closely with our clients to navigate effectively the ever-changing maze of federal and state regulations governing the produce industry. Because disputes are wasteful and detrimental to good business, we strive to help our clients avoid such problems through instruction, advice and training. By working closely with our clients and produce industry trade organizations, we assist the industry by offering both live seminars and educational mailings to improve systems and procedures for complying with federal and state regulatory requirements. This additional training not only offers the immediate benefit of improving office procedures, it also enhances our ability to protect a client's interests when things go wrong.

Our clients are subject to a broad range of regulatory licensing requirements both at the state and federal level. Through our various training programs, we offer clients an effective method for assuring compliance with all of the regulations applicable to their daily operations and their continued good standing with various licensing entities. Through proper documentation of transactions and complying with legal requirements in advance, the risk and liability associated with potential action by a regulatory body such as the U.S. Department of Agriculture is minimized. However, if action is brought by one of these regulatory bodies, we are well versed in the laws and procedures of these actions to assist our clients in defending their interests and protecting their businesses.

GENERAL BUSINESS AND CORPORATE COUNSEL

Because most produce companies do not have in-house counsel, the Firm serves that function on an ongoing basis, providing general corporate advice to its clients on all aspects of their operations, including matters involving corporate governance, business structure, contracts, public reporting, mergers and acquisitions, labor and employment, insurance, finance, commercial lending, antitrust, regulatory, administrative, intellectual property and environmental law. We believe that effective representation starts at the initial stages of a project and encourage clients to submit all critical contracts to us for review before they sign them, allowing us to identify areas of risk that might otherwise go unnoticed. We pride ourselves on being deal makers, not deal breakers, and work closely with clients and their potential business partners to strike the proper balance of responsibilities, risks and benefits.

PACA REPARATION COMPLAINTS, ENFORCEMENT AND APPEALS

Whenever disputes arise regarding the quality of a particular produce shipment, clients often resort to the reparation procedures under PACA before the U.S. Department of Agriculture to resolve them. Meuers Law Firm is highly experienced in maneuvering these disputes through the administrative process, from the initial filing, taking depositions, preparing submissions, and, when necessary, arguing the case before an administrative law judge. We also have specific expertise in enforcement and appeal of PACA Reparation Orders before the U.S. District Courts.

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In re: AmeriServe Food Distribution, Inc., et al.
Case No. 00-0358
United States Bankruptcy Court
District of Delaware
Wilmington, Delaware
Case filed: January 31, 2000

On January 31, 2000, AmeriServe Food Distribution, Inc., the nations' largest, wholesale distributor to fast food restaurants, filed for Chapter 11 Bankruptcy protection in Wilmington, Delaware. The bankruptcy was off to an inauspicious start as the company had been backed into bankruptcy amid pressure from its vendors and swirling allegations of financial impropriety. AmeriServe owed its produce vendors more than $30 million in pre-petition debt, making the proceeding more than three times larger than any insolvency in produce industry history. Within days of the bankruptcy filing, no PACA trust assets, which included cash, inventory of produce, and accounts receivable from the sale of produce, were available to pay PACA trust creditors. AmeriServe had used its cash to pay employees and its inventory had been turned over. AmeriServe had previously sold its accounts receivable to Norwest Bank to raise cash.

We represented 15 PACA trust creditors with claims in excess of $7.3 million. Since no assets were readily available to pay the PACA trust claims, we took the lead in negotiating with AmeriServe, Bank of America, its largest secured creditor, and Tricon Global Restaurants and Burger King, its two largest creditors, to collateralize the PACA trust debt. A deal was negotiated, in which Bank of America, Tricon and Burger King agreed to allow PACA trust creditors to have priority over them to numerous assets, including many which were owned by Tricon and Burger King, in the event AmeriServe liquidated or did not have sufficient money to pay PACA trust claims. This deal protected the PACA creditors in the event of liquidation, but still did not address the issue of obtaining actual payment for the PACA trust claims.

In order to obtain payment, AmeriServe and Bank of America needed to determine which creditors held valid PACA trust claims. A claims procedure was put in place, whereby all creditors who alleged PACA trust protection filed claims. AmeriServe's accountants then reviewed these claims. Any disputes were either submitted to the court or submitted to binding arbitration for resolution. By June 15, 2000, claims involving the sale of fresh produce totaling $26.7 million, were resolved. AmeriServe objected to the claims of frozen french fry vendors on the ground that coatings, which make the fries stay hotter and crisper for an extended period of time, changed the products from perishable agricultural commodities into processed product, thereby removing them from PACA's protection. These french fry claims total more than $14 million and are still pending a resolution by the court.

Since many of the PACA Trust claims were resolved and determined to be valid, a source of payment was needed. Under court supervision, AmeriServe started selling some of its distribution centers and inventory to other distributors. In addition, Norwest Bank collected most of the accounts receivable it had purchased from AmeriServe, which generated a surplus of cash. We negotiated a deal with AmeriServe and Bank of America, in which the PACA creditors and interest payments to Bank of America would be paid from the first monies collected, regardless of whether or not they were PACA trust assets. On June 6, 2000, the bankruptcy judge signed an order allowing payment of PACA trust claims and by the end of June, $26.7 Million in valid PACA trust claims were paid in full!

We are proud to have played a central role in this 100% recovery for the produce industry, which illustrates the effectiveness of the PACA trust in protecting produce sellers.

W.D. Class & Son, et al. v. Lexington Produce Co., Inc., et al.
Case No. JFM 99CV3722
United States District Court
District of Maryland
Baltimore, Maryland
Case filed: December 15, 1999

In December 1999, on behalf of eight PACA Trust creditors, we filed a lawsuit against Lexington Produce, Inc. of Baltimore, Maryland, seeking to recover $375 thousand. We obtained a temporary restraining order, freezing all of Lexington's assets and established a PACA trust account wherein the proceeds from Lexington's accounts receivable were deposited. Lexington's secured creditor, The Bank of Maryland, intervened in the lawsuit, claiming a superior right to these proceeds. In August 2000, the litigation with the bank was resolved and our clients recovered $300 thousand, or 74% of their claims.

Algin Import & Export, Inc., et al. vs. Goldstone's Produce, Inc.; United Food Service, Inc.; Jorge L. Herrera, individually; International Finance Bank; and Ocean Bank
Case No. 98-2110
United States District Court
Southern District of Florida
Miami, Florida
Case filed: September 3, 1998

In August 1998, Goldstone's Produce, Inc., located in Miami, Florida, closed its doors. We represented 16 produce vendors with PACA trust claims totaling $516 thousand. We filed a lawsuit in the U.S. District Court in Miami against Goldstone's Produce, United Food Service, Jorge L Herrera, Ocean Bank and International Finance Bank, seeking payment of these monies.

In lieu of a preliminary injunction, we entered into an agreement with Goldstone's, United Food and Herrera to collect Goldstone's accounts receivable and deposit them in a PACA Trust Account. Unfortunately, the accounts receivable collected amounted to only a fraction of the PACA trust claims.

Alleging that it "owned" the accounts received collected under the initial agreement, Ocean Bank blocked the distribution of Goldstone's accounts receivable we attempted to make to the PACA creditors. We pursued Goldstone's secured creditor, Ocean Bank, to recapture monies Goldstone's had used to pay down its loans with Ocean Bank. The PACA creditors requested, as a matter of law, that the court order Ocean Bank to return the money paid on the loan and the accounts receivable we collected.

After two years of litigation and reviewing hundreds of Ocean Bank's documents, we were finally able to negotiate a resolution of the lawsuit with Ocean Bank. Ocean Bank agreed to allow the PACA creditors to keep the accounts receivable we collected. Further, Ocean Bank agreed to return several hundred thousand dollars it received in loan payments. In August 2000, our clients received over $384 thousand or a 74.5% recovery, including the reimbursement of attorney fees and costs from those PACA creditors who did not participate in prosecuting the lawsuit against Ocean Bank.

Fitz Fresh, Inc., et al. v. Growers Produce, Inc., et al.
Case No. C 99-4688 CRB
United States District Court
Northern District of California
San Francisco, California
Case filed: October 21, 1999

In October 1999, Growers Produce, Inc., located in Oakland, California and one of the Bay area's largest produce distributors, was experiencing severe financial difficulties. On behalf of our clients, we obtained a temporary restraining order in the U. S. District Court, freezing all of Growers Produce's assets. We represented 48 PACA trust creditors with claims totaling $1,676,000. Our lawsuit and the two subsequently filed lawsuits resulted in the liquidation of Growers Produce. Ultimately, the lawsuits encompassed 56 PACA trust creditors as plaintiffs and six defendants, including the owners of Growers Produce, and its secured creditor, Comerica Bank. The lawsuit continued for almost 10 months. The court found that 20 produce creditors with more than $260 thousand in claims had not properly preserved their PACA trust claims and disallowed their claims completely.

The lawsuit was finally settled and the owners of Growers Produce and Comerica Bank paid substantial sums if money to the PACA Trust Creditors.

On September 14, 2000, our clients received $1.29 Million, or a 77% recovery.

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We believe in the old adage "you get what you reward." As a firm philosophy, we want to be compensated for producing value for our clients rather than merely billing for our time. We do not believe that it is wise for us as a firm to be rewarded or pay our attorneys just for working longer hours. Rather, we want to be paid for the value our services create for you, our clients.

For these reasons, we bill for the reasonable value of our services. The factors to be considered in determining a reasonable fee include the following:

• The time required to perform the work at our hourly rates.

• The novelty, complexity and difficulty of the legal questions involved.

• The skill needed to perform the legal services properly.

• Whether the representation precludes our working on other matters.

• Our fee customarily charged for comparable work.

• The significance of the subject matter of the representation.

• The dollar amount involved.

• The results obtained.

• The time limitations and special time demands of the representation.

• The risk of non-payment.

In determining the reasonable fee, we will take into consideration all of these factors. The time devoted to the representation is not the sole or controlling factor. These factors are going to be taken into account to determine whether the value of the work is higher or lower than application of only time and rate factors. Value, however, must not necessarily be equated with winning. We can also provide you with significant value by acting as your advocate through the legal process despite the outcome. Rewarding us for providing you value gives us an incentive to create efficiencies in our firm's operations, to move cases along and to obtain results in the most effective manner possible.

In PACA trust enforcement lawsuits, we often represent a group of PACA creditors with claims against the same company. Group members are only responsible for their pro-rata portion of the overall bill. The pro-rata portion is based upon the percentage each member's claim represents of the total group. Each member's pro-rata share of the overall fees can be reduced even further as more members join the group. For example, while a stand-alone creditor pays 100% of the fees, a creditor with a $10,000 claim pays only 10% of the fees where the Firm already has $90,000 under representation. We often represent the majority of creditors in PACA trust enforcement cases, which results in substantial fee savings to our clients.

We also will arrange other fee arrangements, including payment based on a percentage of the recovery (on contingent fee cases we require an upfront, non-refundable cost payment), flat fee billing where we agree to a fixed price upfront, or budget billing, whereby separate fees are negotiated for different aspects of the case.